Saturday, October 24, 2020

KFC Botswana runs to court to halt ‘quick sale bid’

Kentucky Fried Chicken Botswana has turned on the heat on First National Bank Botswana asking the bank to respond to a string of questions about its integrity after the financial institution approached the court demanding that liquidation of the fried chicken outlet be expedited.

In papers before court, KFC Botswana is accusing FNB Botswana of colluding with its franchisor Yum Restaurants International to sell the business at a price that is far below the market value or to a proffered bidder chosen by the franchisor.

The bank petitioned the High Court seeking an urgent provisional winding up of KFC Botswana.

In his founding affidavit, FNB Chief Executive Officer Steven Bogatsu argues that KFC Botswana is commercially and factually insolvent and should be would up. He states that KFC Botswana is in breach of a loan agreement in the region of P40 million.

According to Bogatsu, KFC Botswana has been in financial difficulties for some time and the bank has been advised by Yum Restaurants International that it has been in breach of its obligations since April 2015. It emerges in the court papers that Yum Restaurants International has terminated its franchise agreement with KFC Botswana.

But KFC Director Anthony Siwawa did not take kindly to FNB’s decision to approach the court to have the business liquidated denying that his entity is insolvent. According to Siwawa, KFC Botswana has serviced the loan well and has in the past two and half years paid close to P8 million in principal and close to P7 million in interest.

Accusing FNB Botswana of being uneconomical with the truth, Siwawa said the bank was aware that Yum Restaurants International, in their keen desire to have the business bought by a South African company, CBH, engineered the situation leasing to the disruptions of KFC Botswana businesses.

Siwawa further accused the bank and Yum Restaurants International to have colluded “to bring these proceedings”.

“The real character behind these proceedings are the franchisor and CBH. The petitioner is being used to achieve the aims of these characters,” he argued. Siwawa argues that throughout the sales process, Yum Restaurants International wanted the business to be bought by CBH through its subsidiary, Callus (PTY) Ltd.

“The problem arose when the respondents (KFC Botswana) proposed to sell businesses to a bidder who came with better terms. It would turn out that the franchisor (Yum Restaurants International) and the failed buyer (CBH/Callus) would conspire with the petitioner (FNB) to put pressure on the respondents, wind them up and acquire their businesses for a price only dictated by them,” argued Siwawa.

He further argued that the “termination of the franchise agreements was thus designed to put pressure on the respondents to sell and later to be wound up by claiming that their substratum have collapsed”.

According to Siwawa, “the various termination agreements and amendments were all a scheme to drive the respondents to sell their businesses worth P151 000 000 for P60 000 000.”

“…the petitioner is revealing how, together with entities that want to buy the respondents’ businesses, have schemed and conspired to bring down the respondents. The petitioner has brought this petition not because it is owed money but purely for purposes of putting pressure on the Respondents to dispose of their businesses for less than their market value to CBH (Callus),” he said.

He argued that they were carrying on the business profitably until Yum Restaurants International decided that they should sell it to a preferred buyer. He said neither has FNB Botswana been joined by any creditor who claims that its debts against KFC become due and payable.

Bogatsu said KFC Botswana has not been complying with various obligations, in particular the failure to keep proper records. He argued that when KFC Botswana was questioned by the bank’s representatives why it was in breach of its statutory obligation, representatives of fried chicken outlet replied that auditors could not continue as it was unable to effect payment for the audit. He said the current amount that KFC owes its creditors is in excess of P100 million.

“Your Petitioner (FNB Botswana) is of the view that the liabilities of Respondents (KFC Botswana) is far in excess of its assets…” he said.

Bogatsu prayed that if KFC Botswana is placed under a winding up order, the provisional liquidator will be able to take charge of the affairs of KFC Botswana, probe its dealings, administer and realise it assets to ensure that the proceeds are distributed to the creditors in an orderly and proper manner.

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