The High Court has extended administration orders issued against Cytonn High Yield Solution (CHYS) in October 2021, until a case filed in court by the administrator is heard and determined.
CHYS is a separate real estate fund, legally distinct from the other funds managed by Cytonn. CHYS went into administration on October 6, 2021, for one year, which was set to expire today, October 6, 2022, pursuant to section 593 of the Insolvency Act.
The administrator is seeking a further six months to be able to achieve the objectives of the administration, according to court documents.
“Despite, his best endeavours, the Administrator has not been able to achieve the purposes of the Administration within that one-year period. However, he should be able to do so, if a six-month extension be granted as sought,” said Walter Amoko, the administrator’s lawyer.
“Should the Administration not be extended as requested, and given the various claims already made (including arbitral awards as well as execution orders) and others in the works, in all likelihood, the very peril which the law sought to cure, a disorderly inequitable and unfair distribution of the assets, will come to pass. The ugly beggar thy neighbour will inevitably ensue as each creditor desperately scrambles for assets as they able to lay their hands on to the disadvantage of all as there aren’t sufficient assets to settle the liabilities,” Amoko added.
CHYS was placed under administration to allow the administrator to carry out a credible balance sheet restructuring plan to be put forward to the creditors which would restructure CHYS’s obligations and rescue CHYS with the aim of achieving a better outcome for both scheme and its creditors.
In the event of failure to achieve such restructuring, the administration would allow the orderly wind down, realization of assets as well as distribution of the same in accordance with the Insolvency Act of 2015.
Before CHYS was placed under administration last year after the board of CHYS decided to extend the maturities of the funds, around 50 investors wanted to get court orders to attach some of the vast real estate holdings, auction them and get themselves ahead of the other 4,000 investors.
The application for administration was filed by the Chief Executive Officer of Cytonn Group, Edwin Dande pursuant to a resolution by the board of CHYS investors.
“The administrator needs to move quickly and give creditors an opportunity to vote a yes or no on the proposal. One year is a long time to still be discussing the same thing. Let creditors decide whether they want to liquidate or restructure the real estate portfolio,” said Dande when reached for comment.
Administration gives the funds the room to restructure, recover, and return value to investors, and does not amount to liquidation.
Following the onset of Covid-19, the funds experienced liquidity strains that were further aggravated by negative publicity and sustained regulatory attacks. In the circumstances, the board of investors of the funds concluded that administration was the best option to provide an enabling environment to restructure the funds and return value to investors.
Some companies that have recently restructured their way back from administration include Kaluworks by the Chandaria family and Britania Biscuits owned by Private Equity firm, Catalyst.