Pwc, which is acting as ARM administrator, has rejected a bank guarantee of KES1.3 billion by Mr Jaswant Rai. The consultancy firm said that guarantee from Mr Rai failed to meet its terms. PwC was also concerned that the guarantee has not provided to cover costs and damages of the consortium loses the case.
“The guarantee is not issued by Pradipkumar Paunrana but by an entity referred to as the consortium which includes Jaswant Rai Group of Companies. Our client has well-founded concerns that inclusion of third parties who are not in court affects the quality and validity of the guarantees,” the rejection letter by Walker Kontos says.
Ousted ARM CEO Mr Pradeep filed an application for an injunction stopping the Administrators from exercising their powers to sell the company in order to pay off debts of the company and to secure the interests of all stakeholders. Following the application by Pradeep, orders were issued by the High Court stopping the Administrators from exercising their powers to sell the company.
ARM Numbers Under Pradeep
In 10 years between 2005 and 2014, Athi River Mining Cement (ARM Cement) made profits totalling to KES 8.3 Billion. That was wiped out in 3 years between 2015 and 2017 as they made losses of KES 12.1 Billion.
Athi River Mining Cement is a familiar name to many households in Kenya with its flagship Rhino Cement. The name provides nostalgic memories to the Nairobi Securities investors whom it hypnotized with its dazzling performances in the 2000s running into early 2010s that saw the company profits and share price grow ten-folds. Investors who have held the shares of the company since 2013 have now lost over 90% of their investments and face the uncertainty of losing everything if the current state of affairs is not handled well. Yes, everything!
This raises the question as to whether this is morally right when looking at the interests of minority shareholders and strategic investors such as UK Government-owned development finance institution CDC Group.
The ongoing court case
As a result of the aforementioned court case, the transaction for the sale of all the Kenyan business and assets of ARM Cement to National Cement Company has now stalled. The Administrators have not been able to procure the regulatory approvals required to complete the transaction. For instance, the CAK approval is yet to be issued.
Deterioration of the Plant and Machinery.
Due to the delay that the court case has caused, the ARM Cement plant and machinery continue to deteriorate. If the process continues to be delayed, it is not clear if the selected buyer, National Cement Company Limited will still be willing to buy the business and assets at the same purchase price.
Stakeholder Views
Kenyan Wallstreet reached out to a former director of ARM cement who sought anonymity given the pending court case. The former executive questioned the use of $140 million investment from CDC meant to settle short term loans. The director also raised concerns about the welfare of ARM’s creditors and shareholders under Pradeep Paunrana’s leadership.
Additionally, an employee of the company who also sought anonymity said that workers are hoping for a new investor to acquire the cement manufacturer. The workers are concerned that if there is no change in leadership, the workers will not get their salaries on time like it was the case before the company went under administration.
