Cytonn has converted 20 percent of the Cytonn High Yield Solution (CHYS) and Cytonn Private Notes (CPN) debt owed to investors into tangible assets in the various real estate projects developed under the Cytonn Group.
In a statement on Monday, September 6, 2021, Cytonn said the conversion of investor funds into real estate is part of the options presented by Cytonn Group, in consultation with various investors, partners, and board officials, on restructuring debt in the two funds.
“The Ksh2.5 billion has been converted in a period of one year as the funds continue to engage with clients on solutions to the liquidity constraint experienced by CHYS and CPN since the onset of Covid19, negative publicity and regulatory attacks,” the statement read in part.
The conversion has been happening across various real estate projects developed under the Cytonn brands.
Commenting on the conversion, Cytonn CEO Edwin Dande stated that, “this demonstrates the advantage of investing in real tangible assets that can be seen and held even in tough times.”
In August, investors Charles Nzioki Kanyaa, Harrison Kaloki Kanyaa, Robert Munyao Kanyaa, were directed by the Court to negotiate with Cytonn Investments first over delayed payout in the Cytonn High Yield Solution (CHYS).
Justice Grace Ngenye found that the investors rushed for litigation before exhausting all dispute resolution mechanisms spelt out in the investment contracts.
According to the contract documents, in the event of illiquidity necessitated by an act of God, such as Covid-19, the contract allowed for a force majeure declaration to manage liquidity. For investors who do not agree to Force Majeure, they are then allowed to go for arbitration.
Following the outbreak of Covid-19, Cytonn was forced to halt the payouts, and extended the payment period for an initial period of three months, thereafter 12 months.
According to Cytonn CEO Edwin Dande, CHYS operated well for eight years, until Covid-19 hit the country in March 2020.
“There is no question that CHYS owes the funds, we have not denied that. There is also no question that cash is safe in real estate projects. The best route is for investors in CHYS to come together with the investment manager to agree on a plan that can monetize the assets and return money to investors as soon as possible. While the Courts, CMA and DCI are incredibly important institutions, there is really no role here for them, because no money is lost, it’s just that real estate is challenged in this environment,” said Dande in AUgust.
In June, Cytonn took the Capital Markets Authority (CMA) to court for sanctioning criminal investigations against the company over its two money market products, the CHYS and Cytonn Real Estate Project Notes.
Investors who sunk their funds in the two offerings were forced to extend a moratorium on payments from the funds or alternatively take up a debt to real estate conversion across the 10 projects.