- KCB says the workers’ contracts were terminated on September 20 when the lender placed the miller under administration.
- The receiver manager said Mumias would engage some employee on a temporary basis.
- This indicates that some of the workers might be recalled under new terms as the bank seeks to revive the once dominant miller.
KCB Group #ticker:KCB has sacked all the employees of Mumias Sugar Company #ticker:MSC who have gone for 30 months without pay, in the first stage of restructuring of the loss making miller.
The bank, through receiver manager PVR Rao, says the workers’ contracts were terminated on September 20 when the lender placed the miller under administration after it defaulted on loans amounting to Sh12.5 billion, effectively kicking out the company’s board and management.
The receiver manager said Mumias would engage some employee on a temporary basis, an indication that some of the workers might be recalled under new terms as the bank seeks to revive the once dominant miller.
“Consequent to the company being placed in receivership, all employees contracts stand terminated from the date of receivership,” says Mr Rao in the letter.
“The receiver shall engage the services of any employee on a temporary basis on mutually agreeable terms until the time when operations resume,” he added.
The struggling miller was placed under administration in September after it defaulted on loans amounting to Sh545 million owed to KCB.
Mumias, which was suspended from trading at the Nairobi bourse, joins a growing list of distressed firms that have gone into administration. Mumias’ loans stood at Sh12.5 billion at the end of June 2018. It owed KCB Sh545 million, Ecobank Kenya (Sh2 billion), French development finance institution Proparco (Sh1.9 billion) and Commercial Bank of Africa (Sh401 million).
Other creditors are the Treasury (Sh3.1 billion) and Kenya Sugar Board (Sh1.6 billion). Mumias was also operating on bank overdrafts worth Sh2.7 billion from various lenders.
Mumias, majority-owned by the government and for a long time Kenya’s largest miller, has not been producing sugar for close to a year and had mainly been relying on ethanol production for its existence. But the exercise was halted five weeks ago after the receiver manager was ejected from the factory by a group fronted by local politicians.
Activities at the Mumias Sugar Company factory were halted after the miller was placed under receivership plunging the firm into deeper financial woes.
Reviving the miller, however, will require an injection of substantial new capital. A task force set up by the Kakamega county government said the miller requires at least Sh5 billion to resume operations.
Mumias had asked the lenders to restructure their loans but the plea was rejected, with the government also balking at providing additional bailout funds to the firm.
The government, which owns a 20 percent stake in Mumias, had given the firm Sh3.5 billion in bailout funds. But the billions have failed to boost the miller’s earnings and capital.
Mumias is technically insolvent to the tune of Sh6 billion after sinking further into losses that have seen its total liabilities surpass total assets.
The firm’s losses in the year ending June 2018 rose to Sh15.1 billion from Sh6.8 billion the previous period. It is yet to release the 2019 results.