In Summary
  • This will add to a $20 million (Sh2 billion) loan to be provided by British investment fund CDC Group, which has a 41 per cent stake in the company.
  • The new borrowings will be used to retire the cement maker’s existing short to medium term debt that is relatively expensive.
  • ARM’s creditors include Lagos-based African Finance Corporation, which it owes Sh4.4 billion and Stanbic Bank (Sh3.3 billion).

The International Finance Corporation (IFC) is set to take over $120 million (Sh12 billion) of ARM Cement #ticker:ARM loans as part of the Nairobi Securities Exchange-listed firm’s efforts to ease its debt burden.

This will add to a $20 million (Sh2 billion) loan to be provided by British investment fund CDC Group, which has a 41 per cent stake in the company.

“We are restructuring our balance sheet to enable the business to recover,” chief executive Pradeep Paunrana told the Business Daily in an interview.

The CDC loan, whose terms are being worked out, is expected to be received within two months. The IFC loan, expected within a year, will be repaid at an interest rate of about six per cent and mature in 10 years.

The IFC has also proposed a $50 million (Sh5 billion) equity investment but Mr Paunrana said it would have to wait until ARM’s market value rebounds, adding that the current share price undervalues the company significantly.

The stock has dropped sharply to trade below Sh4 from a peak of nearly Sh100.

External auditors Deloitte & Touche in their audit report stated that ARM’s assets were overstated. The firm’s share also suffered from revelations that it had defaulted on paying interest charges on a bond it issued in 2015.

The new borrowings will be used to retire the cement maker’s existing short to medium term debt that is relatively expensive, with interest rates ranging between nine to 17.5 per cent.

ARM’s creditors include Lagos-based African Finance Corporation, which it owes Sh4.4 billion and Stanbic Bank #ticker:CFC (Sh3.3 billion).

Page 1 of 2