Stanbic Bank Kenya, bondholders and private equity firm Aureos are among the biggest losers in the collapse of ARM Cement after the company’s liquidators said unsecured creditors are staring at a total loss of about $74.07 million (Sh9.6 billion) once they conclude their mandate.
ARM Cement was placed under administration in August 2018 after defaulting on its obligations, leading to the sale of its assets to compensate creditors.
The amounts raised have been enough to fully settle arrears relating to ARM Cement employees' dues and statutory deductions.
Officials from PricewaterhouseCoopers (PwC), who took over as administrators and later transitioned to liquidators, say in a new report that secured creditors have also been paid $52.1 million (Sh6.7 billion) or 73.43 percent of their claims.
The unsecured creditors have suffered the largest loss as proceeds from the sale of the assets were mostly utilised to pay the priority claimants –employees and lenders that had demanded collateral.
PwC says it has paid the unsecured creditors $6.13 million (Sh795 million at current exchange rates), representing a recovery rate of 7.65 percent of their total claims of $80.2 million (Sh10.4 billion).
Unsecured creditors included Aureos, whose original claim stood at $15.3 million (Sh1.6 billion), Stanbic ($9.1 million equivalent to Sh1.1 billion) and bondholders (Sh1 billion).
“Following the substantial utilisation of realised/retained funds, we do not anticipate that there will be significant dividends available to unsecured creditors going forward,” PwC said in the report dated November 2024.
The liquidators noted that additional funds are likely raise the recovery rate marginally to 75 percent for secured creditors and eight percent for unsecured claimants.
The deficit for unsecured creditors was initially estimated at Sh1.4 billion based on the book value of ARM Cement assets and later at Sh3.1 billion using estimates of the value of the assets in potential disposals.
Stanbic had, however, asked for collateral for a separate $10.6 million (Sh1.3 billion) loan to ARM Cement, helping to mitigate its losses.
Other lenders that protected their interests and recovered nearly three-quarters of their capital include African Finance Corporation that had provided a loan of $50.9 million, Absa Bank Kenya ($1.8 million) and Guaranty Trust Bank (Sh506.8 million).
The liquidation of ARM Cement confirmed that shareholders including, the British International Investment (BII) and former chief executive Pradeep Paunrana, have been wiped out. The company had borrowed heavily to expand its operations in Kenya and Uganda.
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