Kenya's sugar company staring at insolvency after rescue plan with three banks turns soar and leaders recall $25.4m

Mumias has pledged most of its assets to various lenders, including 10,900 acres of leasehold land.

Ecobank Kenya, KCB and Commercial Bank of Africa have demanded to be paid their Sh1.7 billion, ($16m) Sh480.1 million ($4.8m) and Sh364.5 million($3.6m) loans respectively.

French investment fund Proparco which Mumias owes Sh9 billion ($88m) is currently among just a handful of lenders keeping the miller afloat.

"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 its latest annual report.

Mumias, which disclosed its debt problems in the report, says it is now betting on government support to restructure the liabilities even as banks continue to charge interest penalties.

“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, which owns a 20 per cent stake in Mumias, has already bailed out the company to the tune of Sh3.5 billion ($34m) but this has since been consumed, with no improvement in its earnings or capital position.

“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.

According to a local business daily, Mumias’ short-term liabilities exceeded its current assets by Sh15.2 billion ($148m)as of June 2017, signalling a liquidity crisis even as its total book value continues to be eroded by successive losses.

The company is in default on principal and loan repayments.

Ecobank, among other banks, has a claim on the miller’s ethanol plant, its receivables and inventory.

KCB’s loan is secured by part of the company’s land in Mumias while Proparco has a claim on the company’s power generation plant.

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