Troubled Mumias Sugar Company has been placed under receivership by KCB Bank Kenya in a move the lender says is aimed at protecting its assets and to the best extent maintain its operations.
In a statement issued late on Tuesday, the Bank said it has appointed PVR Rao of Tact Consultancy Services as the sugar company’s receiver-manager.
The loss-making company owes KCB Bank Ksh 480.1 million. Other lenders include Ecobank (Ksh 1.7 billion), Commercial Bank of Africa (Ksh 364) million and French investment fund Proparco (Ksh 9 billion). Apart from Proparco, the others in January sent demand letters to Mumias seeking immediate payment.
The company also owes the National Treasury, which owns the majority share. However, the Treasury has also bailed it to the tune of Ksh 3.7 billion.
It would later emerge its management under former CEO Errol Johnson could have misused the bailout money with the company announcing it would conduct an audit to establish how the funds were utilised.
“We have invited investigators to look into the Ksh3.2 billion that was given to the previous management under Errol,” board chairman Kennedy Ngumbau told journalists at Mumias’ Booker Academy in December 2017.
The Kenya Revenue Authority is also demanding Ksh 10 billion in unpaid taxes, which have been outstanding since 2012.
On the other hand, Kenya Power is also demanding nearly Ksh 1.2 billion in unpaid bills. In February, it was forced to sell scrap metal to pay the utility company Ksh 2 million to pave way for reconnection of electricity months after it was cut off affecting normal operations.
Mumias’ losses in the year ending June 2018 rose to Ksh 15.1 billion from Ksh 6.8 billion in the previous period. This means the company is technically insolvent as total assets stood at Ksh 15.7 billion against total liability of Ksh 21.6 billion.
It, however, blamed the deteriorating financial situation to the shortage of sugarcane, which affected operations; a 101% spike in impairment charges to the machinery and plant from Ksh 2.6 billion to Ksh 4.9 billion.