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Kenya: Treasury Rushes to Rescue PanPaper
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The East African Standard (Nairobi)
9 May 2008
Posted to the web 8 May 2008
John Njiraini
Nairobi
The Government has announced a rescue package for troubled PanPaper Mills after a report by audit firm, PriceWaterHouseCoopers, revealed the company was insolvent.
Finance Minister Amos Kimunya said yesterday plans are under-way to inject funds and guarantee adequate wood supply to the Webuye-based company as a short-term rescue measure.
In the medium and long term, the Government will avail land to the company for growing bio-mass for its proposed co-generation project, to reduce dependence on fuel oil and electric power.
"The Government is solidly behind Panpaper and is committed to its turnaround and growth," said Kimunya in a press statement last evening.
He said Government would also pursue the possibility of financial concessions to ease the company's financial burdens and seek ways to improve its internal efficiencies.
Although he did not mention the amount the Government plans to extend to the company, sources revealed Sh200 million has been set aside for the rescue.
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Two weeks ago, a report by PriceWaterHouseCoopers exclusively reported by The Standard revealed the paper manufacturer was on the verge of collapse.
"Panafrican Paper Mills Ltd is in dire financial position. The intrinsic problem of the excessive debt overhang persists. Moreover, the company is facing an imminent cash crunch," stated the report in part, adding that it was indebted to the tune of Sh5 billion.
Kimunya said the company had always been profitable during its 25 years of operations. Things, however, took a turn for the worst in 2000 when it started experiencing financial constraints due to increasing cost of production and stiff competition from cheap imports.
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