Embattled businessman Patrick Bitature is entangled in another hefty legal battle, this time with Absa Bank over a Shs50bn ($13.6m) loan. Interestingly, the dispute is over Electromaxx, a thermal power plant with which Bitature recently entered a deal with government to bail him out over Shs244bn he owed to a South African lender.
The bailout followed the International Chamber of Commerce Court of Arbitration in London, ordering Bitature, his wife Carol Nzaro, and four of their companies to pay South African lender, Vantage Mezzanine Fund, $66m. The money had been borrowed to set up Skyz Hotel Naguru among other businesses and Bitarure risked losing the properties.
In October, Finance Minister Kasaija confirmed that government had signed a “Memorandum of Understanding” with Bitature.
The financial details of the deal were not divulged, but Bitature will operate Eletromaxx for the next five years and then hand it over to government as a “standby generator”.
Auditor General cautioned government
However, Auditor General John Muwanga had cautioned government against the purchase of Electromaxx, citing several concerns including indebtedness and legal disputes surrounding the company.
“I noted that Electromaxx is indebted to the tune of $13,978,900 and Shs138,537,919 in regard to ascertained debts being taxed costs attendant to litigation; and unascertained debts of $1,412,477.76 relating to pending or threatened litigations. These may cause an impediment on the ability of Electromaxx to transfer facility assets to government,” the Auditor General wrote in a report to the Minister of Energy and Mineral Development.
The report also found out that the two leasehold land titles for plots 185 & 200 and plot 198 with a combined size of 4.209 Hectares (10.400 Acres) on which the thermal power plant sits are subject to a Mortgage to Barclays Bank (U) Ltd (Now Absa) under term loan facility of USD.10m.
“Government should ensure that the inventory ownership status is clearly resolved between Eletromaxx and the O&M Provider. In addition, modalities of how the Mortgage with ABSA Bank will be settled should be agreed between Eletromaxx and Government during the decision-making process,” the report adds in parts.
Whether the government followed the Auditor General’s recommendations is still in question.
But now Absa seeks to recover the outstanding loan based on a prior consent judgment, which Bitature later contested on grounds of economic duress and procedural irregularities.
Genesis of the Absa Loan
In 2018, Absa provided a $10m loan to Bitature’s company, Electromaxx, and another $8m to finance a mini oil refinery. Both loans were personally guaranteed by Bitature.
In March 2020, Absa issued a demand notice, following Bitature’s failure to service the loan. In response, Bitature’s Electromaxx challenged the loan facilities in court. This led to a consent judgement in May 2020, where Bitature acknowledged a loan of $15,891,168 and repayment schedules were established.
Eletromaxx then paid 13 out of 46 expected instalments before going to High Court to challenge the consent judgement in July this year.
Bitature’s lawyers alleged the consent judgement was obtained under economic duress and was illegal since only one director signed it.
However, Justice Stephen Mubiru ruled against Bitature and the challenge to the consent judgement was unsuccessful.