Some 110 employees of Kenyan construction firm Spencon have been sacked, marking yet another low for the company that is under administration.
“We wish to confirm that your services with the company have been terminated effective today, Friday January 13, 2017,” says the termination notice seen by the Business Daily.
The memo was written by PricewaterhouseCoopers (PwC) executives Kuria Muchiru and Muniu Thoithi who were appointed administrators of Spencon — a company whose fortunes have been on a spiral having peaked in 2007 when it recorded revenues of $100 million (Sh10.3 billion).
The administrators had not responded to our queries by the time of going to press.
Those sacked are being paid in instalments covering four months prior to the appointment of the administrators in December, with a cap of Sh200,000 per employee in line with provisions of the Insolvency Act 2015.
Any other entitlements, including leave pay and gratuity, rank as unsecured claims against the company.
Those retrenched were employed at Kenyan operations of Spencon, namely Spencon Holdings Limited, Spencon Services Limited and Spencon Kenya Limited.
The firm has several subsidiaries including units operating in Zambia and Uganda.
Spencon started defaulting on employees’ salaries last year, according to documents seen by the Business Daily.
The administrators say the sackings have been necessitated by the lack of sales and refusal by creditors and the shareholder — private equity firm Emerging Capital Partners — to pump in new capital.
“In our memo of December 8, 2016, we explained to you that we are looking for alternative sources of funds after our requests to the companies’ lenders and shareholders were declined. In the alternative, we immediately started the process of realising residual assets.”
The administrators told employees that it would not be prudent to continue incurring debt knowing that there no cash inflows to repay them.
Employees are being paid in instalments from sale of assets including motor vehicles. The administrators are also going after Spencon’s debtors such as construction firm China Wu Yi which recently paid the company from which it hired stabiliser machinery.
“It is from these funds that some advances have been made to your bank account towards meeting your dues according to the law,” the administrators wrote in the memo.
Spencon Kenya Limited, which offers civil engineering works, is in the process of being sold to an un-named investor as part of the ongoing liquidation.
It remains to be seen whether the asset sale would be enough to repay all the creditors, including employees and banks, in full.
KCB Group lent Spencon Sh871.2 million in August 2008, secured by its directors’ personal guarantees and several properties.
The lender in May 2014 asked for the immediate repayment of the outstanding sum, sparking a drawn-out legal battle pitting the bank against Spencon’s directors who later relinquished their positions and shares to private equity fund Emerging Capital Partners.