ARM’s administrators to meet creditors to jump start revival plans

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ARM’s appointed administrators will hold the initial creditors meeting in the first week of October to discuss recovery plans for the cement maker.

The firm was placed under administration on August 17th after Nigeria-headquartered UBA Bank appointed Muniu Thoiti and George Weru of PricewaterhouseCoopers (PwC) to take over the management of the cement manufacturer.

One of the advantages of administration is that it stops the financial position from getting worse and the directors being put at further risk, further, it removes all unsecured debt.

In addition, it gives the creditors power to protect the administrator by giving them a reasonable time frame to negotiate a deal to achieve the objectives.

According to ARMs latest annual report, the cement maker had a net outstanding debt of Sh14.4 billion as at the end of 2017, a 43.5 per cent reduction from Sh25.5 billion as at the last quarter of 2016.

With the administrators on board, the debt is expected to reduce significantly, however, not without full support of the creditors.

One of the advantages of administration is that it stops the financial position from getting worse and the directors being put at further risk, further, it removes all unsecured debt.

As part of the business recovery plan, and ahead of the formal initial creditors meeting, the administrators have implored ARM suppliers and other creditors to continue providing their support.

The administrator will be banking on renewed support from employees, creditors and suppliers to turnaround ARM’s operations and bring it back to profitability.

The creditors are expected to go through the Administrator’s proposal that outlines the strategy they have devised to revive the company going forward. Details of the creditors meeting will be entailed in the proposal.

The meeting will allow the creditors to consider and vote on the Administrators’ proposals. They can also elect a committee of between three and five creditors’ representatives to assist and oversee the Administrators.

PUBLIC NOTICE PUBLISHED IN THE DAILIES

According to Ireland based solicitors Adrian Burke&Associates, creditors are enicouraged to attend the creditors meeting in order to safeguard their interest.

“The attitude of many creditors that matters are out of my hands and there is nothing I can do about it is wrong.”

The solicitors, in a statement placed in their website noted that It is wrong for creditors to chalk down their position as bad luck or take the view that there is nothing they can do just because a company has been put under administration.

The meeting will allow the creditors to consider and vote on the Administrators’ proposals. They can also elect a committee of between three and five creditors’ representatives to assist and oversee the Administrators.

Creditors who attend the meeting are expected to receive an estimated statement of affairs prepared by the directors of the company.

The statement sets out all of the assets and liabilities of the company hence allowing the creditors to assess whether there is a likelihood of being paid by the company.

While the creditors meeting is underway, ARM expects to complete the 100 per cent sale transaction of the issued share capital of Mavuno to Omya and PHL Mauritius in the third quarter of 2018.
The Sh16 billion proceeds from this sale will be applied towards repayment of the outstanding debt of the Company.

The agreement to sell the non-cement business was announced in September 7, 2017 and approved by the shareholders, CMA and the Competition Authority of Kenya in January 22 this year.

Directors have also embarked on a financial restructuring plan of the Group which includes equity injection and replacement of the expensive short-term loans with long-term loan facilities.

Prior to administration a public announcement had been made that CDC was willing to provide funding to the company, provided they controlled the Board and Management and that the remaining debt would be refinanced.

This would be in the form of a long term debt and equity structure solution by providing the company with a Sh12 billion debt refinancing over a 10 year term.

Directors have also embarked on a financial restructuring plan of the Group which includes equity injection and replacement of the expensive short-term loans with long-term loan facilities.

However, this structure will require an equity injection of around Sh5 billion , and working capital lines of up to Sh500 million to allow the operations of the company to keep going.

The exiting senior management Pradeep Paunrana, Managing Director and Surendra Bhatia Deputy Managing director are working together with PWC as the administrators were appointed before CDC had a put in their own management.

Notwithstanding the current state of the business operations, ARM still believes that it has a strong underlying sustainable core business and that is capable of a turnaround with the support of all stakeholders, as all plants are operational and the industry and business proposition are still strong

 


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