- Case on ARM receivership to be heard Monday as warring teams seem bent on not ending stalemate.
A company in receivership is like a sick patient who needs to go under the knife urgently lest his chances of survival diminish.
And as cement-maker Athi River Mining (ARM) case heads to court Monday, the firm will have been under 13 months of management and counting as warring parties seem bent on keeping its fate in limbo.
According to a report by Apex Capital on the state of cement in Kenya, ARM and East Africa Portland Cement are no longer churning out notable quantities of the building material.
The decline in production is mainly attributed to operation challenges.
“ARM Cement and East African Portland Cement Company, are currently experiencing some problems that have led to ceasing of production,” Apex Capital said.
The court battle between Jaswant Rai of Rai Cement and his business rival, Narendra Raval of National Cement, has stalled the sale of ARM Cement past the expiry of receivership, having been placed in administration on August 17, 2018. The uncertainty has made Stanbic Bank to threaten to freeze salaries for the company’s 1,000 workers.
Both parties agree that at the current state, the cement maker is sinking further into the ground.
An affidavit filed in court by former ARM owner, Pradeep Paunrana, who had been retained by the receivers as the general manager, claims that the administrators, PricewaterhouseCoopers (PwC), have run down the plant and allowed key talent to leave.
“Poor planning, slow decision making and failure to engage with management requests as well as what I believe is understanding of critical items and operations for a cement plant, have caused preventable loss and damage to ARM,” Paunrana says in the affidavit.
PwC, on their part, reckon that while the fight over ARM assets drags in court, the company will choke up more losses and may lose its Tanzania subsidiary, Maweni Limited, which is being sought to be attached by creditors.
The cement-maker risks stopping its operation if it fails to renew its licence, and given the significant fixed costs incurred each month, it will accumulate more losses and higher financing costs as well as deterioration of the plant, which investors claim has not undergone maintenance for years and would require up to Sh2.5 billion to optimise it.
The administrators also fear that National Cement may walk out of the deal, given the uncertainties which may come at a cost of breaking contract.
Paunrana accuses PwC of burning through cash advanced to keep the business, paying themselves Sh134 million ($1.34 million) and Sh184 million ($1.84 million) to consultants advising on the sale of the cement maker.
PwC, however, says it has deployed more than 20 professionals on a mostly full-time basis at the cement manufacturer’s various sites and locations.
According to Pradeep, the secured creditors have extended Sh448 million ($4.48 million) for the company and its subsidiaries which have gone to settle management fees rather than company operations.
“The administrators have paid themselves and the consultants an aggregate sum equivalent to over 70 per cent of the sum that they claim has been funded by secured creditors,” he says.