A PwC report on the affairs of the cement maker shows that the consultancy firm charged a fee of $650,000 (Sh65.6 million) for the first three months of their one-year mandate.
PwC was paid by ARM Cement’s lenders who will add the amounts to their claims on the debt-ridden company.
The PwC fees are calculated hourly and vary depending on the experience and seniority of the consultancy firm’s employees working on a specific project.
Troubled ARM Cement’s #ticker:ARM administrators, PricewaterhouseCoopers (PwC), have billed the company a total of Sh73.5 million in fees since their appointment on August 17, according to disclosures made by the advisory firm.
A PwC report on the affairs of the cement maker shows that the consultancy firm charged a fee of $650,000 (Sh65.6 million) for the first three months of their one-year mandate.
PwC, which was hired by UBA Bank Kenya Limited to run the affairs of ARM Cement, had already earned fees of $78,845 (Sh7.9 million) for preparatory work ahead of taking over the company’s management.
That takes the total amount PwC has so far earned to Sh73.5 million, out of which Sh59.5 million has been paid and the balance of Sh14 million is to be settled in the near term.
PwC was paid by ARM Cement’s lenders who will add the amounts to their claims on the debt-ridden company.
“These fees were paid out of lending advanced to the administration by the lenders of the company, to enable the administrators carry out their mandate,” says the report.
Hourly calculation
The PwC fees are calculated hourly and vary depending on the experience and seniority of the consultancy firm’s employees working on a specific project.
The huge payouts to the administrators means that the final bill that ARM Cement will pay depends on the number of PwC staff on the job, their titles and how long they are engaged in helping the company settle its outstanding debt.
PwC says it has deployed more than 20 professionals on a mostly full-time basis at the cement manufacturer’s various sites and locations.
The two administrators that PwC appointed to run ARM, Muniu Thoiti and George Weru, are paid $430 (Sh43,000) per hour each while an associate director charges $375 (Sh37,800) hourly. The rate per hour for a senior manager is $300 (Sh30,000), that of a project manager is $250 (Sh25,000) while the going rate for a senior consultant is $120 (Sh12,000). A consultant has the lowest charge at $80 (Sh8,000) per hour.
“Going forward, the administrators propose that their fees be calculated monthly based on our hourly rates provided above. This is in regards to the level of input by the administrators and their staff on the project,” says the report.
“The administrators further propose that they be reimbursed for their expenses and disbursement at costs. These expenses and disbursements relate to the cost of travel and accommodation, printing and stationery and telephone costs, settled out of pocket by the administrators.”
The proposals were ratified by ARM Cement’s creditors at a meeting held on Tuesday when PwC was also authorised to implement several options of resolving the company’s debt, including selling assets and bringing in a strategic investor.
Some of the influential lenders represented at the meeting were African Finance Corporation (AFC) and Stanbic Bank, which provided ARM with loans amounting to Sh7 billion or half the Sh14 billion claimed by secured and unsecured creditors.
Strategic investor
Getting a strategic investor to buy ARM Cement is likely to be a tall order, several suitors having walked away in a recent attempt to sell the company.
The consultancy firm’s mandate expires in September 2019 but can be extended by the courts.
Mr Thoithi told the Business Daily that creditors with claims amounting to 99.9 per cent of the value of ARM’s outstanding obligations approved PwC’s proposals.
He added that the advisory firm will in the short term seek a bridge loan from ARM Cement's existing secured lenders and other parties to maintain production.
The company is currently producing cement at an estimated 30 per cent capacity in Kenya and 25 per cent in Tanzania, indicating that it is still making losses on the suboptimal output levels.
It remains to be seen if ARM Cement's suspension from the NSE will be lifted on Monday next week as earlier scheduled.
PwC says the suspension is necessary due to the dire financial position of the company.
Other companies in similar or worse situations such as Uchumi Supermarkets and Mumias Sugar, #ticker:MSC however, continue to trade speculatively on the NSE.
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