Kenya’s ARM Cement Limited is yet to finalise its capital injection agreement with the International Finance Corporation (IFC) with regards to a capital injection that will help the struggling company get back on its feet.
IFC has reportedly offered to settle more than $120 million in loans ARM cement acquired. According to company’s chief executive Pradeep Paunrana, the company is discussing a term sheet with IFC and a complete agreement is still in the pipeline.
“Nobody just gives you 120 million dollars without conditions. We are in discussions; it is not a facility [but] a term sheet. There are conditions attached to this,” he said adding that the company is concentrating on reviving its Tanzania operations, increasing cash flow, cutting down its debt, and refinancing the balance.
The major conditions of the term sheet include returning to profitability and acquiring an equity investor in the next nine to twelve months. The company has been scouting for an investor since October to help curb its losses.
According to brokerage firm EFG Hermes, ARM Cement’s debt was at Sh14.4 billion at the end of 2017 and it defaulted on a coupon payment for a $10.3 million loan with a 17.5 per cent interest rate.
Maweni Limestone Limited
ARM’s Tanzanian operation, Maweni Limestone, has been struggling but that could change thanks to the improving business environment in the country. According to Paunrana, coal supplies in Tanzania have surged and cement retail prices have increased. Additionally, ARM’s clinker facility in Tanga is operating at almost full capacity.
“We are reviving the business, strengthening management and getting to a position where whenever we bring equity, it is at most favourable terms to the lenders and shareholders,” he said.
Earlier this week, the chief executive said the company will turn Sh21.6 billion owed by Maweni into equity.
