Pan-African lender Ecobank and French development financier Proparco have seized the prime assets of Mumias Sugar Company from KCB Group #ticker:KCB, setting the stage for a vicious court battle that could throw the planned leasing of the ailing miller into disarray.
Ecobank filed a notice on November 29 with the Attorney-General’s office indicating it had hired Harveen Gadhoke, as its receiver manager in a forcible takeover of Mumias Sugar’s ethanol plant.
Proparco, in what appeared like a coordinated fashion, filed a similar notice on the same day, claiming rights to the sugar miller’s power generation plant.
The two plants together with Mumias Sugar’s milling unit have been under KCB appointed receiver-manager — Pongangipalli Venkata Ramana Rao — since the miller was placed under receivership in September 2019 to protect its assets and maintain operations.
This means that Mumias Sugar has three receiver managers in a new turn that looks set to derail the leasing of the firm.
The sugar miller has received revival bids from a number of investors, including businessman Julius Mwale, steel tycoon Narendra Raval and billionaire Rai family.
Ecobank reckons it lent Mumias Sugar Sh2 billion for the ethanol plant while Proparco says it is owed Sh1.9 billion for the power generation plant, built in an income diversification move.
Other creditors protested KCB’s sole right over the miller, arguing that Mr Rao was running the plant without their input despite the Kenyan bank being owed Sh545 million by Mumias Sugar.
“Pursuant to Ecobank Kenya Ltd’s notice of appointment dated 29th November 2021, Mr Harveen Gadhoke has been appointed Receiver over the ethanol plant in respect of Mumias Sugar Company Limited (in receivership),” says the notice seen by the Business Daily.
The ethanol plant has been generating money for Mumias Sugar, particularly at the height of the Covid-19 pandemic when the product was in demand as a hand sanitiser.
The power plant, which uses sugar by-products to generate electricity through a process called co-generation, has been dormant.
The asset takeover comes in the middle of a suit that saw the High Court direct KCB to involve other creditors in the operations and planned leasing of the ailing miller.
Justice Alfred Mabeya ruled that Mr Rao would be answerable to all the parties owed by Mumias Sugar through a creditors committee. The miller’s loans stood at Sh12.5 billion at the end of June 2018, including Sh401 million to NCBA Bank #ticker:NCBA .
Lawyer Jackline Kimeto moved to court in March 2019 seeking to liquidate the company because she argued that it was insolvent as it could not pay her debt of Sh76 million.
The court ruling and assets takeover will affect the planned leasing of Mumias Sugar, which must now receive the backing of the top creditors.
Under the initial leasing deal, the successful firm was to run the plant on behalf of KCB for up to 25 years and pay the lender monthly leasing fees.
Mr Mwale placed the highest bid of Sh27.6 billion for the leasing.
Mr Raval, through his Devki Group, offered Sh8.4 billion while Rai, under his West Kenya Sugar, offered Sh3.5 billion.
According to the receiver manager, a total of eight entities submitted their bids to lease the troubled sugar miller.
Unlike the other State-owned sugar firms where the bidding was through public tendering, the receiver-manager said the Mumias Sugar issue was handled through a private treaty between the investor and the bidders.
“Receiver was of the opinion that a private treaty is a much better option than public tendering. In addition, the private treaty will be less expensive, much faster and the receiver would be able to conclude the technical and financial assessments of the bidders in the shortest period,” said Mr Rao.
The lender has been barred from auctioning the plant to secure assets used as security for other loans, prompting it to turn to the lease option.