Feb 7, 2023

Mawazo Writing Africa

Writing about the main

Sale of ARM Tanzania assets raises $19m surplus

The sale of ARM Cement’s assets in Tanzania raised funds that paid all creditors’ claims in that market and left a surplus of Ksh 2.3 billion (US$19.6 million) that was remitted to Kenya On site, the funds were used to settle liabilities such as amounts owed to banks and investors in the Company’s commercial paper.

Read: ARM was eventually wound up, leaving creditors taking home $104 million in debt

The company’s Tanzanian subsidiary, Maweni Limestone Ltd, was sold to the Chinese Huaxin Cement company sold for Ksh 11.9 billion (US$101.8 million).

The amount was more than enough to settle all claims from Maweni’s creditors totaling Ksh 8.7 billion ( $74.4 million) to be paid, incl finally Ksh 538 million (US$4.6 million) due to the Tanzanian tax authorities.

“Over US$20 million transferred to Kenya and added to Kenyan proceeds to pay creditors” , administrators told Business Daily.

Also read:ARM Divests Assets to Pay Off $284 Million in Debt< /p>

The Kenyan assets were sold for Ksh 5 billion (US$42.7 million) to the National Cement Company, owned by billionaire businessman Narendra Raval.

Despite excess cash from Maweni, Kenyan creditors suffered significant losses in the cement maker’s liquidation.

Lenders and unsecured creditors lost Ksh11.5 billion (US$98.4 million) in the process, while shareholders were completely wiped out.

Unsecured creditors who have a total claim of Ksh 9 billion (77 million en US dollars) against the company suffered the largest haircut after recovering only 6.2 percent of that amount. Secured lenders – mainly banks like Absa Bank Kenya and UBA Bank Kenya – received Ksh 4.98 billion (US$42.6 million) out of their total Ksh 8.03 billion (US$68.7 million) in claims. dollars).

Also read:Dangote buys ARM to make it the largest player

Preferential creditors who get paid first in bankruptcies, were fully compensated at Ksh326.6 million (US$2.7 million). p>

The cement company debacle shows the risks of sitting at the bottom of the payment waterfall where a creditor is first compensated , after claims were settled by others higher in the hierarchy.

The largest unsecured lenders included commercial paper and bondholders of ARM valued at Ksh 1.82 billion (US$15.5 million ), private lender Aerous at Ksh 1.55 billion (US$13.2 million) and Stanbic Bank at Ksh 920.1 million (US$7.8 million). The cement maker’s former employees were also owed Ksh 30 million (US$256,739) in arrears of wages.

Also read:ARM Cement’s Kenyan assets for US$50 million Dollar Sold – Explanation

Due to ARM’s financial difficulties, the company was placed into administration in August 2018 after defaulting on bank loans as losses mounted and eating away at its capital, with major shareholders including the Paunrana family and British sovereign wealth fund CDC Group failed to raise new capital to solve the problem.

It had accumulated Ksh 14 billion (US$119.8 million) in debt and was negative at the time Equity capital of Ksh 2.4 billion (US$20.5 million).

The move into administration led its longtime CEO, Pradeep Paunrana, whose family founded the company in 1974.