Why grabbing Tatu City was a matter of life and death for Stephen Jennings

The boardroom coup that saw Bidco CEO Vimal Shah, former Central Bank Governor Nahason Nyagah and businessman Stephen Mwagiru lose a voice in the running of Tatu City project was part of a wider scheme by the New Zealand investment banker Stephen Jennings to recover the heavy debt and losses he had incurred in Russia, we can authoritatively report.

The thinking was simple. Kick out the Kenyan shareholders, sell of the Tatu City project land as quickly as possible and pay up European and Russian creditors who were breathing on his neck and get out of Nairobi as quickly as possible.

To understand this scheme, we will take you to the events that happened in Moscow in 2013.


January mornings are very chilly in Moscow – usually below zero degrees.

Such was the weather on January 1, 2013. The weather man had announced that temperatures would be -2 °C and visibility would be diminished by a heavy fog.

It is this gloomy weather that Senior Managers at Renaissance Capital Head Office in Moscow received a disturbing email whose effects would be felt 10,000 kilometers in Nairobi.

Chief Executive Stephen Jennings who founded the company 18 years earlier, holding it steady during the Russian crisis of 1998 and building it into the biggest and most successful bank in emerging markets, had given up on the company and had walked out to start a new life elsewhere.

Jennings resignation was the climax of cataclysmic events in the firm that started at the height of the global financial crisis in 2008 forcing him to sell 50 percent of his stake in Renaissance Capital to Russian politician Mikhail Prokhorov to save the company from bankruptcy.

At the time of the resignation, Renaissance was just a step away from bankruptcy. Technically, the firm was insolvent, servicing debt with more debt.  Its cash generating assets had become illiquid at the onset of the financial crisis and its trading income had stagnated in the face of stiff competition from relatively new Russian state-owned banks.

So bad was the financial position of the firm that in November 2012, international credit rating agency, Moody’s downgraded the firm’s ability to service its debts to B3. This was the third negative rating in three years.

B3 is the worst credit rating and it means that the firm in question is not in a position to meet its debt obligations.

The firm’s financial woes were self-inflicted. Still reeling from the impacts of the global financial crisis and cash guzzling global expansion, Jennings borrowed Sh115 billion in 2009 from the public through a Eurobond issue to capitalize Renaissance. The proceeds of the bond were to repay an earlier bond of a similar amount that was already weighing down the bank.

With Moody’s downgrade of Renaissance creditworthiness, Jennings lost the last hope of ever nursing the firm back to health.

The firm which had posted losses for three consecutive years was still heavily indebted and all indications were that it would be wound up by its creditors.

Giving up

Jennings was forced to take up responsibility for the investment bank’s woes and remedy the situation by giving up 51 percent shareholding. Jennings shareholding was transferred to Prokhorov who now took full control of the firm.

Breaking the news to the managers in the January email was Jennings long time deputy, Hans Jochum Horn who tried to assure the managers that the firm would recover in spite of the turbulence it was going through.

The news of the Jennings resignation got to the media 50 days later after one of the managers leaked Horn’s letter to Russians business daily, Vedomosti Daily.

In the email, there was a little detail that would change the course of things in Sh280 billion Tatu City.

Horn told the senior managers in the email that apart from pleading with creditors to restructure the tenure of Sh50 billion Eurobond, the firm would also be seeking to dispose assets held by the firm but were not core to its investment banking operation.

In fact, in November 2012, when Moody’s dropped the bombshell on the firm’s creditworthiness, a decision had been reached to split the investment banking business held under Renaissance Capital Financial Holdings and asset management business held under Renaissance Group whose assets included land assets in Africa.

In the email, Horn told the senior managers that Renaissance Group had assets worth US$221 million (Sh22.1 billion) but these assets were opaque and illiquid.

These assets included Jennings shareholding in Tatu City which was through a Cyprus registered firm, SCF II Holdings and Renaissance Capital.

What Horn did not divulge to the senior managers is the fact that, although Renaissance Group assets were valued at US$221 million, the new firm had a huge debt of US$225 million (Sh22. 5 billion).

US$98 million (Sh9.8 billion) debt to the assets management arm was held by Prokhorov through his investment firm Onexim Group.

In November when the Renaissance was split into two distinct companies, Jennings was forced to relinquish his shares in Renaissance Capital and continue as the Managing the highly indebted Renaissance Group.

In other words, Jennings was leaving Russia with a mountain of debt that he hoped Africa would help him repay.

Enter Frank Mosier

Yet even the relocation was a not a walk in the park. Renaissance Group whose assets were held under Renaissance Asset Managers was broke.

To finance his relocation to Africa, Jennings turned to his former employee during the better days at Renaissance Capital, Frank Mosier.

Mosier was now a billionaire who had struck a gold mine with Kazimir Partners, a Russia focused hedge fund that he founded in 2002.

Negotiations between Jennings and Mosier for the sale of Renaissance assets in Africa were first reported by Russian private sector owned news agency, Interfax on December 25, 2012 while the sale was concluded in March 2013.

The financial consideration in the deal between Jennings and Mosier was not divulged when the deal was concluded in 2013 but Mosier took over as the board chair at Renaissance Group.

But the acquisition of Renaissance Asset Managers by Kazimir Partners only increased the pressure on Jennings to squeeze money from the African assets.

Besides pressure from creditors such as Prokhorov, he now had to answer to Mosier and investors in Kazimir Partners who wanted a quick return for their investments.

Yet the only assets that had the potential for turning in quick cash in Renaissance Asset Managers assets was Tatu City Project.

In Ghana, a project for a city similar to Tatu City had stalled while in DR Congo its land ownership was held up court cases.


But to squeeze money from Tatu City drastic decisions had to be.

First, the interest rates for the loan that Jennings through Renaissance Investment Partners had advanced to the offshore company CedarSoc that he owned jointly with the Vimal Shah, Nahashon Nyagah and Stephen Mwagiru had to be increased in order to squeeze more money for Kazimir Partners and Jennings creditors.

Tatu City draft accounts we have seen show that by 2014, sale of 10 plots of Tatu City land had generated Sh7.5 billion all the money had gone to repay the loan. According to the accounts prepared by Jennings, the loan had of Sh6.2 billion had ballooned to Sh9.4 billion by the end of 2014.

To get the loan to Sh9.4 billion, Jennings had increased the interest charged to CedarSoc to 33 percent per year and applied it retrospectively to 2011 when it was disbursed.

But that was just a small part of the scheme. The next act was bull-doze a board resolution that would sanction the selling of another plot of land to make further loan repayments.

Vimal, Nyagah and Mwagiru opposed the motion when it was introduced in January 2015 arguing that the loan had been repaid in full and that selling off another piece of land would kill the Tatu City dream.

Unknown to the Kenyan shareholders, Jennings had unilaterally diluted their shareholding and increased his and that at this point he could pass any motion in the board. Eventually, Jennings had his way and another piece was sold at Sh4.8 billion which again went to Renaissance Asset Managers accounts.

Yet, to complete the scheme of stripping Tatu City, he needed board members who agreed with his every motion in the board and management. In February, he achieved this feat by Nyagah as company chairman and all senior Tatu City limited staff, replacing Nyagah with coffee baron, Pius Ngugi.

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