Kenya’s Mumias Sugar placed under receivership over US$60m financial woes

KENYA – Cash strapped Mumias Sugar Limited company has been placed under receivership by KCB Group following the execution of a lender’s agreement deed dating back to September of 2010 to protect its assets and keep operations running.

The move by KCB follows approval by the court and consultations between the bank and inter-lenders who are owed an estimated sum of Ksh.6 billion by the down-trodden sugar miller.

The company has been on a run of commercial debt uptake over the past four decades from just a handful of lenders including Barclays, Stanbic Bank and state agencies including Kenya Power.

In addition to that the Kenya Revenue Authority (KRA) is demanding a sum total of Ksh.10 billion (US$1Om) in outstanding taxes.

KCB Group featuring as the primary lender to the struggling sugar miller sorted for Tact Consultancy Services and appointed Mr PVR Rao as the sugar company’s receiver manager.

The receiver will immediately take over the day to day running of the Mumias Sugar Company as the firm’s assets are transferred to the statutory management of the newly appointed care taker.

Mumias Sugar Company technically lies in bankruptcy to the tune of US$60 million (Sh6 billion) having seen its net liabilities surpass its net assets in the year ending June 2018 making it difficult to meet its outstanding obligation to creditors.

According to the company’s half year 2019 financial results, sales in the six months to December 2018 dropped by 96% to Sh25 million (US$250000) from US$6.8 million (Sh680m) recorded in a similar period the previous year.

The miller attributed the decline to lack of products for sale during the period following shutdown of its production line between July and December.

The company said that earnings were negatively impacted during the review period due to reduction in sugarcane supply, which provides over 80% of its earnings, that saw the firm halt its operations.

The takeover of Mumias Sugar operations by the KCB Group comes in just weeks after the County of Kakamega moved it to save the miller from imminent demise having put forth a business turnaround structure which if successful would see the devolved unit take up a controlling stake in the struggling company.

Efforts by the national government to revive the once premier miller have borne no fruit. The National Treasury has since pumped Sh3.7 billion (US$37m) into the company’s turnaround plan that has not been successful.

Other than heavy borrowing, the miller is ailing from poor governance, investment in projects that never gave returns, high cost of production and a poor farming model.

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