KCB Group has placed Mumias Sugar Company under administration after the miller defaulted on loans amounting to Sh12.5 billion it owes the bank and other creditors, effectively kicking out the company’s board and management.
The lender says it appointed consultancy firm PVR Rao to take over the Nairobi Securities Exchange-listed firm’s operations, effective on Tuesday.
The move is expected to be followed by suspension of Mumias’ shares from trading on the NSE in line with the Capital Markets Authority’s previous response to similar events at other publicly traded firms.
The miller’s share price, which has been on a long-term decline on the back of losses and a dividend drought, closed trading at Sh0.27 yesterday and assigned the miller a market value of Sh413 million.
“KCB Group can confirm that Mumias Sugar has been placed under receivership to protect the listed firm’s assets,” KCB said in a statement, adding that this will allow the administrator to protect the company’s assets, maintain operations and bring the miller back to financial stability.
Obtained court orders
The bank says it is pre-empting more punitive actions sought by other creditors including auction of Mumias’ assets. Unsecured creditors have gone to court and some have already obtained court orders attaching the miller’s assets, according to KCB Group.
The bank did not say whether the administrator will receive new funding to help turn around Mumias, which has since stopped producing sugar. It was also not immediately clear whether KCB’s action is supported by other banks whose loans the miller has also failed to pay. KCB says it will work closely with the administrator to ensure all material information is made available to investors and creditors and ensure a transparent turnaround process.
The lenders have been frustrated by Mumias’ default for years but the court actions and KCB’s move to appoint an administrator are the strongest moves they have taken so far to protect their interests. Mumias had asked the lenders to restructure their loans but the plea was rejected, with the government also balking at providing additional bailout funds to the company.
The government, which has a 20 per cent stake in Mumias, has already bailed out the company to the tune of Sh3.5 billion but this has since been consumed, with no improvement in earnings or capital position.