KCB Group #ticker:KCB has lost full control of running troubled Mumias Sugar Company after the High Court directed it to involve other creditors in the operations and planned leasing of the ailing miller.
Justice Alfred Mabeya directed the KCB appointed receiver manager — Pongangipalli Venkata Ramana Rao — to involve and seek the nod of other creditors, including Ecobank Kenya and French development finance institution Proparco on the miller’s operations.
Mr Rao has been running Mumias under the direction of KCB since the miller was placed under receivership in September 2019 to protect its assets and maintain operations.
Other creditors protested KCB’s sole right over the miller and joined a suit seeking a say in Mumias operations, arguing that the receiver manager was running the plant without their input.
Now, Mr Rao will be answerable to all the parties owed by Mumias Sugar through a creditors committee. The millers’ loans stood at Sh12.5 billion at the end of June 2018.
Apart from KCB’s Sh545 million, it also owes Ecobank Kenya (Sh2 billion), Proparco (Sh1.9 billion), which financed the construction of the power plant at Mumias and Commercial Bank of Africa (Sh401 million).
"The interim administrator owes the duty of care to account to all other creditors under the Act," Justice Mabeya said.
Mr Rao, he added, will have to file a report on Mumias Sugar operations, including financial dealings, every six months.
The court ruling will affect the planned leasing of Mumias Sugar, which must now receive the backing of the top creditors.
The receiver is seeking to lease the firm in the latest revival bid and has received bids from a number of investors, including businessman Julius Mwale, steel tycoon Narendra Raval and billionaire Rai family.
Under the initial leasing deal, the successful firm will 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 of Mumias Sugar.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 bidders submitted their bids to lease the troubled sugar factory.Unlike the other State-owned sugar firms where the bidding was through public tendering, the receiver-manager said the Mumias 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 instead of […]