Tough times lay ahead of Mumias Sugar company. This is after 3 lenders recalled Ksh 2.6 billion in loans disbursed to the miller. The lenders which include Ecobank Kenya, KCB and Commercial bank of Africa are demanding Ksh 1.7 billion, Sh480.1 million and Sh 364.5 million in loans respectively. The 3 banks have recalled the loans breaking ranks with other lenders such as Proparco-a French investment who are owed a total of Sh 9 billion.
The miller made public its debt problems in their annual report and is depending on government support to help restructure the loans which are currently accumulating additional interest and penalties. Mumias Sugar is currently in default of both principal and loan repayments.
“With the exception of Proparco, Kenya Sugar Board and the National Treasury, all the other lenders have issued demand letters requiring immediate payment of all sums outstanding,” Mumias says in the report. “The company, together with anchor shareholder, the Government of Kenya, have initiated a structured process to discuss with the lenders with a view to restructuring the debt liabilities.”
The Government of Kenya is the principal shareholder with a 20% stake and has already sun 3.5 billion in bailouts to the company. However, no improvement in earnings, sales or production has been seen from the investment. To avert the liquidation of the Millers assets and keep it running, the taxpayer will most likely sink more money into the miller.
As at June 2017, the miller’s short-term liabilities were in excess of Sh 15.2 billion with the company’s net worth standing at Sh 756.5 million. In the period under review, the market capitalization at the Nairobi Security exchange was Sh 1.5 billion with each share selling at a speculative price of Ksh 1 per share. With the total book value continually being eroded, Mumian sugar might be headed for liquidation.
“If the above strategies are not fully implemented, there would be a material uncertainty as to the company’s ability to continue as a going concern and it may, therefore, be unable to realise its assets and discharge its liabilities in the normal course of business,” Mumias says in reference to its rescue plans, including receipt of more bailout money.
The government is keen on reviving the company by advancing loans on loose terms to the miller. For instance, the company received Sh 839.2 million from the government as a Cash infusion which was later classified as a long-term debt to the miller’s advantage.
Most of Mumias assets are pledged to various lenders with KCB’s loan secured by the company’s 10,900 acres of land. Ecobank has a claim on the ethanol plant while Proparco has a claim on the company’s power generation plant.
The miller reported a larger net loss of Sh6.7 billion in the year ended June compared to Sh4.7 billion the year before as sales collapsed to Sh2 billion from Sh6.2 billion. The loss was aggravated by higher costs, including legal fees which more than doubled to Sh482.3 million from Sh196.1 million.
The value of its sugar and power generation plants was also written down by Sh2.3 billion.