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The Nairobian

Athi River Mining to retire debt with investor capital injection

Business

By Lee Mwiti | May 02, 2016

Athi River Mining (ARM) will use Sh11 billion of the Sh14.1 billion equity investment it received from the UK-owned development institution CDC group to retire some of its debts.

ARM managing director Pradeep Paunrana said the debt plan will see the company save Sh1.1 billion as it looks forward to restructure its debt books.

The firm announced that a further Sh2 billion would be used to increase production of its cement capacity in its Kenyan plant, with an intention to go back to profitability.

During the confirmation of the deal at Nairobi’s Serena Hotel, Mr Paunrana added that the Sh14.1 billion investment will make up 14.4 per cent of his company’s capital base and the company now intends to issue new shares at Sh40 per share.

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“We will now approach the Capital Markets Authority, as well as the Competition authorities both in Kenya and Tanzania for approval. Then we will seek approval from our shareholders,” Paunrana said.

In a rather emotional speech, Paunrana narrated how after posting losses of up to Sh3.4 billion last year, and slowly sinking into debt, his family stared at losing control of the company owing to dilution of their shares in favour of CDC.

But Equity Bank Chief Executive James Mwangi, who was present in the confirmation gave him hope to go forward with the deal. “It’s a difficult decision to be diluted but without the equity investment, ARM would have gone down,” said Mwangi.

Among other things, the deal allows Paunrana to manage ARM with the same team, while CDC will get two seats at the board.

The company blamed its losses on deprecation of both the Tanzanian and Kenyan currencies last year, with the latter depreciating by 20 per cent. It also blamed high interest rates as well as power rationing in Tanzania, which affected its Tanga plant.