Kenya Commercial Bank Group, KCB, has taken over the ailing Mumias Sugar Company after the firm failed to pay back the loan it owes the bank.
According to reports, the group took over after the company failed to clear a total of Ksh480.1 million debt it had disbursed to the insolvent firm, testing efforts to rescue it from liquidation.
The group has already appointed a receiver-manager to oversee the activities of the company.
KCB Group had in 2017 together with Ecobank and Commercial Bank of Africa had loaned the embattled company a total of Sh2.6 billion shillings in a move to revive its operations after undergoing tight financial constraints.
Ecobank and CBA had both loaned the company Ksh1.7 billion and Ksh364.5 million loans respectively.
KCB Group takes over Mumias Sugar Company over default in loans, appoints receiver manager to run the beleaguered miller. pic.twitter.com/ChEagSbDSY
— Chamgei Fm (@Chamgeifm1) September 24, 2019
Mumias, which disclosed its debt problems in 2017, stated it was betting on government support to restructure the liabilities even as the three banks continued to charge interest penalties.
Initially, the company, together with anchor shareholder, the Government of Kenya, had initiated a structured process to discuss with the lenders with a view to restructuring the debt liabilities.
According to financial reports, the government, which owns a 20 per cent stake in Mumias, had already bailed out the company to the tune of Ksh3.5 billion in May 2019, but this has since been consumed, with no improvement in its earnings or capital position.
In August 2019, the company’s effort to get back into business was crippled by Kenya Revenue Authority (KRA), which froze its accounts, citing claims of Ksh10 billion unpaid taxes.
KRA had issued an Agency Notice to all the company’s bankers, restricting transactions until Ksh10 billion in taxes outstanding since 2012 are settled in full.
A new task force had suggested the management of the company to be taken over by the Kakamega County Government.
The task force team had suggested that the county should use part of its revenue to buy shares of the ailing company before taking full control of its activities as the days progress.