The High Court in Kampala has extended, by 3 months, its earlier 6 months injunction against Stanbic Bank’s attempts to enter Maestrol Oil and Gas Solutions – MOGAS Uganda Limited into receivership.
This, maintains the 6 months period given to the company, one of the region’s leading operators in the fuels and LPG wholesale and retail markets to secure financing and or investment to enable it to recover from the logistics shocks caused by the Covid-19 pandemic.
Founded in 1987, MOGAS is an integrated regional downstream oil marketing company with business operations ranging from international oil trading to marine and inland terminals, retail networks and lubrication services. With operations in Uganda, Kenya, Tanzania, Rwanda, Burundi, the Democratic Republic of Congo (DRC), as well as a presence in the United Arab Emirates (UAE).
Court, on 7th February 2022, first gave both Stanbic Bank and its appointed receivers, Kabiito Karamagi, a 6-month hands-off order, to allow MOGAS to complete what it said were ongoing negotiations with various investors as well as financiers to enable it to secure enough resources to stabilize the business, from the shock impact of the Covid-19 pandemic. This is after after MOGAS satisfied the Judge, Hon. Lady Justice Jeanne Rwakakooko, that it was making solid progress on both securing the financing and investment, which would then enable it to refinance its financial obligations to Stanbic Bank.
Background
MOGAS and Stanbic Bank have been embroiled in a commercial dispute since October 2021 over debt repayments. This is after MOGAS’ business was hurt by massive global logistics blockages in the fuel logistics and distribution chain. The pain was made worse by regional lockdowns that reduced demand for fuel products. This would affect the company’s ability to meet its obligations on time.
Subsequently, Stanbic moved to enter MOGAS into receivership, through a receiver, Kabiito Karamagi. MOGAS, filed Civil Suit No. 703 of 2021, among others, contesting the amount and level of indebtedness.
Pending the hearing and determination of the case, MOGAS also filed Miscellaneous Application No.1358 of 2021, praying for a temporary injunction against Kabiito Karamagi, the receiver, from any illegal interference with the management and operations of their business until after the main suit, had been disposed of. MOGAS also asked the court to stop what they called “acts of trespass” on their business premises as well as a “restraining order on both the bank and the receiver, barring them from dealing with MOGAS’ business in any way until the final determination of the main suit.
MOGAS also prayed that the court suspends and or reverses the Kabiito Karamagi as a receiver for 1 year to allow it to complete an investment into the company by prospective investors. MOGAS also asked court to order a comprehensive audit of the transactions between itself and Stanbic by an independent auditor appointed by the Court to ascertain the exact amount owed by the Applicant both principal and interest.
After hearing MOGAS’ Miscellaneous Application No. 1358 of 2021, Lady Justice Jeanne Rwakakooko in two orders; one on 25th January 2022 and another on 7th February 2022 issued a temporary injunction against the “selling, disposing of, wasting, damaging, alienating, or otherwise interfering or dealing howsoever with the Applicant’s property for 6 months.”
The Hon. Lady Justice also issued an injunction against the taking over and or selling or “otherwise interfering or dealing howsoever with their (the Applicant’s) property until the determination of the main suit.”
“A temporary injunction issues hereby suspending the 2nd Respondent as Receiver of the Applicant for 6 (six} months from the date of this Ruling, or until the determination of the main suit (whichever comes first) to allow the Applicant to complete investment negotiations and also to cause for a comprehensive audit to ascertain the exact amount owed by the Applicant to the 1st Respondent ahead of the main suit,” court, ordered then.
Court also ordered that following 3 months, after 7th February 2022, all the parties shall return to Court for a review of the state of affairs, to satisfy the judge that MOGAS was progressing well with completing investment negotiations and the comprehensive audit. If Satisfied, the judge said, the court would maintain the 6 months to allow for the finalization of the investment negotiations and the comprehensive audit.
Inside Uganda’s Property Market: Broll Uganda’s Moses Lutalo on Sector Realities and the Signals Investors Can’t IgnoreThe court, at the time, said that if it was established that MOGAS’s attempts to get an investor had failed, the Stanbic would be at liberty to reinstate the Receiver, pending the outcome of the main suit.
Court also ordered that if at review, MOGAS had been able to secure refinancing, the funds claimed by Stanbic would be alienated and held pending the determination of the main suit or settlement of the main suit.
MOGAS satisfies Court that it is making solid progress
As ordered by the court, the parties all appeared in court on 27th April 2022 for review. Lawyers, David Kaggwa and Sam Ogwang appeared for MOGAS, while Dennis Wamala and John F. Kanyemibwa appeared for Stanbic Bank. Olivia Kyalimpa Matovu appeared for Kabiito Karamagi. Geoffrey Rugazora, the Group CEO for MOGAS, Candy Wekesa Okoboi – Head Legal for Stanbic Bank and Kenneth Kawalya, Head Business Support and Resolution for Stanbic, were also in attendance.
At the review, the major question of the day was whether the period granted in the Court Order of 7th February 2022 should be enlarged for a further three (3) month period by the said Court Order.
MOGAS’ lawyers told the court that MOGAS was in negotiations with Ethos Mezzanine Partners of South Africa who have indicated their willingness to finance the Applicant to the tune of 10 million dollars and that the Applicant had signed the letter of intent on the 22nd of April 2022.
They also told court that they were in talks with Equity Bank Uganda Limited- and had on the 14th of February 2022, applied for credit facilities from Equity Bank to the tune of USD10 million and that they were in the advanced stages of signing the offer letter.
MOGAS also told court that, Ola Energy who had expressed their willingness to come on board as equity partners were finalizing their due diligence process. Petredec of the United Kingdom who have expressed their willingness to come on board as equity partners were also carrying out their due diligence.
Regarding the audit, MOGAS told court that they had engaged an audit firm – Sekitto, Kaimanda and Company Associates – CPA who are carrying out an audit of their business relationship with the 1st Respondent for the period between 1st January 2010 to 3rd December 2021 and that the process would be complete by the 31st of May, 2022.
As proof of the above, MOGAS presented to court, a non-binding expression of interest dated 21st April 2022 from Ethos Mezzanine Partners to provide mezzanine term funding in respect of MOGAS’ proposed debt refinancing and expansion plans. They also presented a letter to Equity Bank Uganda Limited dated 14th February 2022 applying for Credit Facilities of USD10 million and emails from Equity Bank officials regarding this application. They also presented a letter dated 23rd September 2021 from Petredec (Europe) Limited to Aspire Investment Trust that showed there were engagements on “combining forces that would allow Mogas to become a leading regional operator in the wholesale and retail sectors of the Fuels and LPG market.”
MOGAS also presented a letter from Ssekito, Kaimanda & Co. Associates, Certified Public Accountants of Uganda dated 22nd April 2022 giving timelines for completion of the Audit.
Convinced that MOGAS was making progress, Hon. Lady Justice Jeanne Rwakakooko on 5th May 2022, ordered: “Following the return of the parties to this Court and the review of the state of affairs about this matter, I am satisfied that there is progress in this matter, and therefore, in accordance with the Ruling of this Court and Order dated 21st January, 2022 and 7th February, 2022 respectively, I hereby enlarge this period for a further three (3) month period.”
