World Bank unit eyes stake in ailing ARM

The World Bank’s financing arm - International Finance Corporation - says it is still interested in buying into struggling local cement maker, Athi River Mining (ARM).

The firm had approached IFC twice for fresh capital injection before it sank into receivership.

IFC said yesterday it is watching closely the resolution of the receivership to asses if it can participate in the recovery of the ailing cement maker.

“We talk to anyone when a proposal comes our way and that is how we came to discuss with ARM. We are watching closely how the resolution is developing to see if it is a good proposal when it comes out of that,” said IFC Kenya Country Manager Manuel Moses at a press briefing in Nairobi to announce the lender’s investments in sub-Saharan Africa for the 2018 fiscal year.

The World Bank affiliate announced record new investment commitments of $6.2 billion (Sh620 billion) in long-term financing in sub-Saharan Africa for its 2018 fiscal year, up from $3.5 billion (Sh350 billion) in the previous fiscal year.

Sérgio Pimenta, IFC’s Vice-President for the Middle East and Africa announced a further $2 billion (Sh200 billion) investment to help de-risk African markets by tackling regulation, political risks and local currency financing to help attract investors to Africa’s fragile economies.

Iron out deal

“The cornerstone of this new strategy — called IFC 3.0 — is to systematically create new markets by tackling market and regulatory imperfections and by collaborating upstream on the policy side. For the necessary capital to be mobilised, IFC aims to reduce risks — both real and perceived,” Pimenta said.

ARM was put under PriceWaterhouseCoopers administration when its Kenyan lenders sought to protect their investment after the firm defaulted on interest on a commercial paper and the shareholders failed to iron out a deal to restructure the debt.

PWC is expected to give a forensic audit of the company’s health on November 1, which would put to rest speculation on the state of affairs at the cement maker.

The audit could also confirm fears that the company is teetering towards a precipice.

“This is a very lucrative asset. Once we clarify the potential of the company to all stakeholders transparently, which will be done, investors will understand. Right now there is a misunderstanding in the market that this company is so bad that it will simply close. That is so far away from the truth,” said ARM Managing Director Pradeep Paunrana in a recent interview.

Now under administration for 12 months, the cement maker, which is currently operating at 40 per cent capacity, can rest without pressure from creditors as it seeks a way out of debt.

The management believes that there are several solutions to paying off a Sh3.3 billion debt owed by its Tanzanian unit and Sh10 billion by the Kenyan unit.

Mr Paunrana said for the firm to make a full recovery, the debt needs to be cut in half and working capital improved by a few hundred millions by selling off some of the assets or through a rights issue.

The firm could also open up to strategic investors, which could give IFC a chance to buy into the firm, as well as Tanzanian investors who are said to be keen on the developments in Kenya, hoping that with a resolution, the firm can be cross-listed on the bourses of the two countries.

IFC, which has ramped up investment in the country, including a stake in investment firm Britam has also invested in Kenya Airways, Kenya Commercial Bank and Equity Bank.

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International Finance CorporationAthi River MiningIFCMiddle East and AfricaVice-PresidentSérgio PimentaPriceWaterhouseCoopers