Vehicle and Equipment Leasing Limited (Vael) has asked the High Court to bar ARM Cement from offloading a stake of its business following a disputed Sh214 million debt.
Vael says ARM has disputed its Sh214 million claim for vehicle leasing services, which it started providing to the cement manufacturer in 2007.
The firm holds that its debt recovery mission may be rendered futile if ARM is allowed to complete the transfer of its business and operations.
ARM Cement PLC’s intention to transfer its business and operations to ARM Energy Limited was advertised in a Kenya Gazette notice on October 19.
The notice stated that ARM Energy Limited will not inherit ARM Cement PLC’s debts or liabilities. Vael says ARM’s failure to pay up has seen it fall behind on loan repayments.
The firm says its failure to repay loans taken to satisfy the contract with ARM has seen financiers grow cold feet towards lending it money for other projects.
The firm has also enjoined ARM’s subsidiary Adpak Limited in the case. Neither ARM nor Adpak has responded to the suit.
“On various occasions, Vael held meetings together with both respondents and the financing banks in which ARM made commitments to discharge its payment obligations which to date have not been honoured.”
“The respondents subsequently failed to make payments as agreed and accrued rental arrears due and interest prompting termination of the lease agreement between themselves and Vael. None of these processes elicited any response or explanation from ARM and Adpak,” Vael legal officer Pauline Wambui says.
ARM, which manufactures the Rhino brand of cement, is suffocating under the failure of several of its businesses, combined with slow construction activity in the industry.
The company’s troubles can be traced to its decision to finance its Tanzania expansion through debt, only to meet huge operational challenges in the new market.
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