ARM Cement’s Kigali plant will be auctioned for the second time to pay off a debt. The troubled Kenyan-based cement company halted the first auction through a court injunction after the offer made failed to meet company expectations. The sole offer was $1,157 which fell short of the plant’s market value of $1.4 million by over 70 per cent.
“The only bid was $1,157 and it was rejected because it was far lower than the 70 per cent of the $1.4 million the market value of the plant,” Kigali Professional Bailiffs Association tweeted on Monday last week.
The auction will help the cement company pay off its creditor Rwanda Enterprise Investment Company (REIC) $693,641. The plant is being auctioned as a result of a court battle that lasted from 2013 to 2016 according to a court bailiff Aloys Bizimana.
The plant belongs to the Kigali Cement Company, a subsidiary of ARM Cement. REIC has been a shareholder of Kigali Cement since 2008 as reported on The New Times.
ARM Cement and Kigali Cement
ARM purchased a 37 per cent stake in Kigali Cement in 2010 and started to struggle financially at around the same time.
“Since 2010, ARM has been struggling to run the Kigali Cement subsidiary due to management inefficiencies from the time they acquired the plant and dividends to shareholders begun shrinking,” a source told The New Times.
The management that was obligated to run Kigali Cement was allegedly running obscure operations behind the backs of the private shareholders.
The agreement between REIC and Kigali Cement was entered into in 2008 where REIC promised to invest $482,307 in Kigali Cement where $337,608 would be repaid over 60 months at ten per cent interest while $144,669 would be an equity investment.
Part of the agreement required REIC to offer technical assistance which KCC says the company failed to do thereby making it impossible for the firm to generate the $115,606 yearly.
However, the court ruled that it found no proof that the lack of technical assistance resulted in the failure of the company’s operations and their ability to pay the creditor. Additionally, KCC agreed in court that REIC has provided $20,000 as technical assistance.
The court, therefore, ordered KCC to pay REIC $729,876.
ARM has been facing financial troubles in Kenya where it was suspended from trading on the NSE last month after it was placed under administration.
