ARM creditors' Sh3.1bn underwater, says PwC

“According to the statement of affairs presented by the directors of the company, there is no deficit as regards the fixed charge and floating charge security holders, given that the book values and estimated realisable values of their securities cover their debt fully,” reads part of the report.

“Unsecured creditors, on the other hand, would suffer deficits of Sh1.5 billion and Sh3.1 billion under the book value and estimated realisable value of the assets of the company, respectively.” PwC noted that the loss estimates are likely to change since ARM’s assets have not been valued, among other factors.

The unsecured creditors include medium term bond investors who lent ARM Sh1 billion, commercial paper holders (Sh682.3 million), Aureos (Sh1.5 billion) and Stanbic Bank #ticker:CFC (Sh920.1 million).

Stanbic Bank’s other loans of Sh1 billion was secured by both a fixed charge (on specific assets) and floating charges (a claim on all assets), protecting it against default in a structure that also benefited other creditors, including Barclays, which is owed Sh184 million.

AFC’s Sh5.1 billion and Guaranty Trust Bank (Kenya) Limited’s Sh506.8 million also enjoy similar double protection, with the floating charge kicking in to cover any shortfalls in the fixed charges.

“Based on the information provided by the management, on realisation of the fixed charge security, we observe that there will be a shortfall of Sh7 billion for the creditors secured by a fixed charge,” the report says.

“We note that the creditors secured by fixed charges also hold security over the floating assets of the company. According to the information provided to us by the management of the company, the value of assets subject to floating charge security stands at Sh13 billion.”