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New twist in Mumias miller’s lease as creditors disown deal

BUSINESS
By Frankline Sunday | August 7th 2021

The main entrance to Mumias Sugar Company.[Benjamin Sakwa,Standard]

The fight for Mumias Sugar Company Ltd’s (MSCL) assets worth billions of shillings has taken a new twist after some creditors opposed the plan to lease the miller.

The creditors also disowned the receiver-manager Ramana Rao. The miller is currently under receivership. In a statement yesterday, the creditors said plans to put the property up for lease were illegal and against existing court orders restraining the disposal of the defunct miller’s assets.

“It has come to the attention of the creditors that an advertisement for leasing and operating of the assets belonging to Mumias Sugar Company Ltd has been published inviting bids from the general public for the disposal by lease of specified assets of MSCL,” said the creditors in a statement.

“Take notice that the said Tact Consultancy Services is a stranger to the insolvency proceedings mentioned herein and do not hold the mandate of the court nor any creditors or lenders to dispose of any assets of MSCL whatsoever - either by an outright sale or tenured lease,” read the statement.

Earlier this week, Tact Consultancy Services invited bids from interested investors to lease the company’s assets that include the nucleus estate, sugar factory, ethanol plant, electricity co-generation plant, residential estate, guest house, clubhouse and a golf course.

“With a view to inject a new lease of life and to facilitate the turnaround of the miller to profitability through modernisation and efficient management, the receiver wishes to invite the investors who are interested in the leasing of all or any of the above facilities for a mutually acceptable period at an agreed monthly lease rent,” stated the notice by Tact Consultancy.

The advertisement was the second attempt in as many months by the receiver-manager from Tact Consultancy to seek an investor to commit the billions of cash needed to restore the fortunes of the sugar miller.

In June this year, Devki Group of Companies withdrew a bid to lease the miller for 20 years after a section of farmers and local politicians opposed the lease given under a private treaty.

“I had bid as the Devki Group of companies for Mumias and with the good intention to ensure that we revive the sector and bring back its livelihood,” Devki Group chair Narendra Raval told the media in June this year.

“There is no other intention and we follow due process. I was supposed to lease it for 20 years and I wanted to invest about Sh5 billion during this time frame.”    

Rao told the Senate Standing Committee on Agriculture recently that he had advised the creditors to pursue leasing of the company through a private treaty to increase the chances of getting an investor.

“I had recommended to all the parties concerned before we took it to the public stakeholders because a private treaty is always a better option,” Rao told senators when invited to give submissions on an inquiry into the issue.

“Private treaty is very fast and less expensive but it is known to all parties and public knowledge that Mumias is available for lease.”

Rao clarified that no bidder had been awarded the lease for Mumias, stating that the bids were still at the evaluation stage. Rao’s Tact Consultancy was hired by KCB Group in September 2019 to be receiver managers when the miller was placed under receivership for defaulting on KCB’s Sh585 million debt.

However, a section of the over 100 creditors moved to court this year and obtained orders barring the liquidation of the miller and its assets pending the determination of the dispute.

“Any person or entity purporting to interfere with the assets of MSCL without the express approval of the court risks both criminal and civil action by the creditors,” stated the notice published yesterday by two law firms acting on behalf of the creditors.

The last Auditor General report on Mumias Sugar Company published months before it went under receivership found the firm was technically insolvent with Sh21 billion in liabilities against Sh15 billion in assets.

The miller issued a secondary share offer in 2006 at the Nairobi Securities Exchange starting at Sh49.5 per share. The share price has since taken a dive to below Sh0.30 by the time it was suspended from trading, wiping out billions of shillings in investor value.

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