Economy

Adan blames lenders for delay in PanPaper sell-off bid

adan

Cabinet Secretary for Industrialisation and Enterprise Development Adan Mohamed. Photo/FILE

Lenders are holding back the sale of Webuye-based Pan Paper Mills in a transaction expected to lead to the revival of the firm that collapsed in 2009.

Industrialisation secretary Adan Mohamed told the National Assembly Finance, Planning and Trade Committee that talks with the five financiers has delayed the sale deal.

He said the government has settled for one of the six private investors who had shown interest in reviving the paper firm, but the Cabinet secretary declined to identify the firm on grounds that it would threaten negotiations.

Six investors, mainly from Congo and Egypt, had shown interest, but only two submitted bids.

Long-term lenders hold securities on the factory and its assets, including land and the plant, a liability estimated at Sh6 billion.

The creditors include the International Finance Corporation, which is owed Sh2.5 billion, Deutsche Bank (Sh1.8 billion), PTA Bank (Sh682 million) and the East Africa Development Bank (Sh317 million).

“We are trying to bring them together in order for us to move out of receivership. Each of the lenders wants to maximise returns and we hope the process of negotiations with the lenders will be finalised within two weeks,” Mr Mohamed told the MPs Tuesday.

“We are negotiating with potential investors and we are discussing with various private firms as a way of selling Pan Paper. We will conclude the process of sale before the end of May.”

The Pan Paper factory owed its creditors Sh3 billion as of 2009 when it was closed, leaving thousands of workers jobless.

At its peak, PanPaper had about 1,600 staff and would engage an average 3,000 casual workers monthly.

It also affected business in Webuye town whose economic well-being was directly dependent on the industry.

In 2010, the government paid Sh1.2 billion to the short term lenders in an effort to have the factory revived. The firm was closed again two weeks after the relaunch.

The government owned a 25 per cent stake in the firm with Orient Paper Ltd — an Indian conglomerate — owning 34 per cent. The rest of the shares are held by ICDC, EADB, Development Bank of Kenya and Barclays Bank Trust Investment Services.

Mr Mohamed appeared before the MPs to provide government position on the status of reviving the mill after residents of Webuye petitioned Parliament, through Speaker Justin Muturi on Pan Paper revival.

“We will sell it to a company that will revive the mill and not to someone who will dismantle and sale parts of the plant,” said Mr Mohamed.

READ: Panpaper may be sold to a timber trader cheaply without regard for public gains

MPs questioned the feasibility of reviving the factory saying the cost could be too heavy than building a modern paper mill.

“Is this Pan Paper a viable project? The government should not sink money in unviable projects even if it is the mainstay of western Kenya economy,” said committee vice chairperson Nelson Gachuhie.