Troubled cement maker ARM’s #ticker:ARM fate will be known later this month when its creditors, including banks that placed it under administration, meet to vote on how to settle the company’s mountain of debt.
ARM, currently suspended from trading on the Nairobi Securities Exchange (NSE) #ticker:NSE , is considering liquidation, raising Sh5 billion through a rights issue or selling more assets, including the Tanzanian operation, among other options, Pradeep Paunrana, the founding shareholder said.
Mr Paunrana who, it has emerged, still works for ARM as chief executive officer, said all options were on the table in the fight to get the company back on its feet.
“ARM can be sold, we can raise money from existing shareholders and we can also sell assets,” Mr Paunrana said at ARM’s head office in Westlands where he now reports to the company’s administrators PricewaterhouseCoopers (PwC).
“A creditors’ meeting will have to be held by end of this month and that is when they will choose the path we will take.”
UBA Bank, which had provided ARM with a Sh500 million short-term loan, on August 17 appointed PwC’s Muniu Thoiti and George Weru to manage the cement maker in an effort to recover the debt.
The administrators asked the company’s bankers and suppliers to file their claims ahead of the crucial meeting in which creditors owed an aggregate of at least 75 per cent can decide on a solution that will be binding to all, including the dissenters.
African Finance Corporation (AFC), which provided ARM with a loan of Sh4.6 billion, and Stanbic Bank #ticker:CFC (Sh3.2 billion) will have a major influence at the meeting as they hold nearly 36 per cent of the total outstanding liabilities of Sh21.7 billion as of June.
Whichever option the creditors settle on will take about one year implement, said Mr Paunrana, who is yet to complete his Sh1.6 billion purchase of ARM’s non-cement business in partnership with Swiss firm Omya.
If creditors choose to liquidate the cement manufacturer, its assets will be sold and the proceeds used to pay off banks, bondholders and suppliers.
Any surplus remaining will then be distributed to shareholders according to the weight of their ownership.
Assuming the company realises the book value of its assets, shareholders could share a total of Sh20.8 billion going by the rate of about Sh22 per share.
Getting a strategic investor to buy ARM is likely to be a tall order, several suitors having walked away in a recent attempt to sell the cement maker.
Mr Paunrana said a more likely option is to raise Sh5 billion through a rights issue to be structured by PwC. The offer will then be made to existing shareholders, who will have the option of snubbing the cash call or transferring their rights to other investors.
ARM’s share price collapse is, however, likely to complicate such a transaction. The company last traded at Sh5.5 per share, meaning that offering a discount on that price will be a further hit to long-term shareholders, who have lost more than 90 per cent of their paper wealth.
ARM could also sell more assets, a move that will raise funds to reduce its debt. That will leave it with a smaller but potentially more profitable operation.
ARM’s suspension from the NSE is likely to continue beyond October 26 as PwC works with creditors to find the best possible solution.
Mr Paunrana, however, acknowledged that the administrators have the final say, having effectively replaced the board in the strategic and day-to-day running of the company.
Mr Paunrana said he never resigned from the company, indicating that the previous announcement of his departure was the result of an internal power struggle that subsided with the entry of PwC.
ARM, he added, is currently producing cement at a 30 per cent capacity in Kenya and 25 per cent in Tanzania, noting that these levels are not sustainable in the long term.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.