Bitature and South African lender fight over $30m home loan
A long-running fight between Ugandan businessman Patrick Bitature and Vantage Capital has escalated as the lender seeks to auction off the gems of Bitature’s real estate empire in Kampala.
South Africa-based Vantage Capital, one of the continent’s largest mezzanine debt providers, has hired auctioneers to sell some of Bitature’s key properties. They include the 30 Elizabeth Royal Apartments in Kololo, the Skyz Hotel in Naguru and the Moyo Close Apartments, also in Kololo.
The properties are owned by Simba Telecom Limited of Bitature, but have been mortgaged by its property holding company, Simba Properties Investment Company Limited.
The dispute dates back to 2014 when Vantage Capital loaned Bitature $10 million to invest in the 14-unit Moyo Close Apartments and Skyz Hotel in Naguru, both still under construction. It was the first investment the South African lender made in Uganda.
“Vantage brings an important and exciting new financing model to the East Africa region. Simba Group is pleased to have found a strong mezzanine financing partner who provides medium-term growth capital but does not want to take our hard-earned equity,” said Patrick Bitature, Founder and Chairman of Simba Group at the time. .
Warren van der Merwe, COO of capital provider Mezzanine, raved: “Simba has managed to build an impressive and successful group of companies through a combination of entrepreneurial flair and highly professional management. “This is the kind of story that underpins our pan-African investment strategy of supporting mid-sized family businesses looking to raise growth capital without having to dilute their shareholder base. This is the type of group that we would like to support in future transactions.
But the honeymoon didn’t last long. Sources familiar with the transaction, but who spoke on condition of anonymity in order to speak freely, said nearly a decade later, Bitature and its Simba group of companies have not repaid a single dollar to the lender. South African.
“After receiving the money, instead of repaying the loan, they hired lawyers to say that South Africans were not allowed to lend in Uganda and therefore could not claim the loan back,” a source said. close to the file. “So the case has been pending in court for years, bouncing from one courtroom to the next.”
Another source said: “There was an arbitration clause in their deal, where if there was a disagreement they would find an independent arbitrator to settle the issues. But when the case went to this stage, the lawyers for the Simba group then changed their position and said that the nature of the agreement amounted to activities of financial institutions which should have been regulated by the Bank of Uganda. , which the South Africans were not, since they are a venture capitalist. fund, not a bank.
On June 16, 2021, Judge Boniface Wamala of the Commercial Division of the High Court of Uganda ruled that the arbitration agreement between Simba and Vantage was valid and referred both parties to arbitration.
Two days later, Vantage sought to transfer shares of Simba Properties Investment Company Limited, Simba Properties Limited, Linda Properties Limited and Elgon Terrace Hotel Limited, all held by Bitature, into its name, as provided for in their financing agreement.
However, Uganda Registry Services officials refused to transfer the properties on the grounds that there was still a legal dispute between the two parties which was still under arbitration. When Vantage applied for judicial review to challenge this position, High Court Judge Musa Ssekaana dismissed the application on the grounds that the Vantage partnership was not registered as a company in Uganda and therefore could not sue or be sued. . However, he noted that the URSB should have proceeded with the transfer of shares.
Sources familiar with the matter say the $10 million awarded to Bitature has now tripled to around $30 million with interest, fees and penalties. Companies associated with the businessman have had an ongoing dispute with Absa Bank over a multi-million dollar loan.
Bitature is one of the leading indigenous businessmen and sits on several boards, including those of Umeme, the electricity distributor, and Bolloré Transport and Logistics Uganda. Industry watchers say the dispute could undermine international confidence in Uganda’s corporate governance sector and make it more difficult for private sector players to secure flexible funding from private equity funds and capital risk.