French lender Ecobank seizes Mumias Sugar from KCB
- Ecobank filed a notice on Nov. 29 with the Attorney General’s office stating that it had hired Harveen Gadhoke as receiver manager in a forced takeover of the Mumias Sugar ethanol plant.
- Proparco, in a way that seemed coordinated, filed a similar notice the same day, claiming rights to the power plant at the sugar mill.
Pan-African lender Ecobank and French development financier Proparco seized the main assets of Mumias Sugar Company from the KCB group #ticker: KCB, paving the way for a vicious legal battle that could wreak havoc on the struggling miller’s rental project .
Ecobank filed a notice on Nov. 29 with the Attorney General’s office stating that it had hired Harveen Gadhoke as receiver manager in a forced takeover of the Mumias Sugar ethanol plant.
Proparco, in a way that seemed coordinated, filed a similar notice the same day, claiming rights to the power plant at the sugar mill.
The two factories as well as the Mumias Sugar grinding unit have been placed under the management of the receiver-manager appointed by KCB – Pongangipalli Venkata Ramana Rao – since the miller was placed in receivership in September 2019 to protect its assets and maintain its operations.
This means Mumias Sugar has three receiver managers on a new twist that should derail the company’s leasing.
The sugar mill has received stimulus offers from a number of investors, including businessman Julius Mwale, steel mogul Narendra Raval and billionaire family Rai.
Ecobank estimates it has loaned Mumias Sugar 2 billion shillings for the ethanol plant while Proparco says it owes the power station 1.9 billion shillings, built as part of an income diversification move.
Other creditors protested KCB’s exclusive right to the miller, arguing that Mr. Rao was running the plant without their contribution despite Mumias Sugar owing 545 million shillings to the Kenyan bank.
“In accordance with the notice of appointment of Ecobank Kenya Ltd dated November 29, 2021, Mr. Harveen Gadhoke has been appointed receiver of the ethanol plant in respect of Mumias Sugar Company Limited (in receivership)”, indicates the opinion seen by the Daily business.
The ethanol plant made money for Mumias Sugar, especially during the height of the Covid-19 pandemic when the product was in demand as a hand sanitizer.
The power plant, which uses sugar byproducts to generate electricity through a process called cogeneration, has been dormant.
The takeover of the assets comes amid a lawsuit that saw the High Court order KCB to involve other creditors in the struggling miller’s operations and planned lease.
Judge Alfred Mabeya ruled that Mr. Rao would be accountable to all parties owed by Mumias Sugar through a creditors committee. The miller’s loans stood at 12.5 billion shillings at the end of June 2018, including 401 million shillings to NCBA Bank #ticker: NCBA.
Lawyer Jackline Kimeto went to court in March 2019 to seek liquidation of the company because she argued that it was insolvent because it could not pay its debt of 76 million shillings.
The court ruling and the asset takeover will affect the Mumias Sugar rental project, which must now receive support from major creditors.
As part of the initial lease, the successful company was to operate the plant on behalf of KCB for a period of up to 25 years and pay the lender a monthly rental fee.
Mr. Mwale placed the highest bid of 27.6 billion shillings for the lease.
Mr. Raval, through his Devki group, offered 8.4 billion shillings while Rai, as part of his West Kenya sugar, offered 3.5 billion shillings.
According to the manager of the escrow, a total of eight entities have submitted their bids to lease the ailing sugar mill.
Unlike other state-owned sugar companies where the bidding was by public tender, the receiver-manager said the Mumias Sugar issue was dealt with through a private treaty between the investor and the bidders.
“The receiver was of the opinion that a private treaty is a much better option than a public tender. In addition, the contract under private signature will be less expensive, much faster and the receiver will be able to conclude the technical and financial evaluations of the bidders as soon as possible, ”said Mr. Rao.
The lender was prohibited from auctioning off the plant to secure assets used as collateral for other loans, prompting him to turn to the lease option.