10 October 2018

Kenya: Growing 40-Year-Old Debt Could Cost Cement Firm Land

Cash-strapped East African Portland Cement Company (EAPCC) risks losing four parcels of land to Kenya Commercial Bank (KCB) over a 40 year old loan that has accumulated to Sh4.5 billion.

The cement manufacturer told Parliament last week that a huge chunk of the Sh10.8 billion it is yet to pay outsiders is owed to the lender and that it currently lacks the capacity to settle it.

Portland took an initial loan from the bank in 1978, which has subsequently been enhanced to the current level. Managing director Simon Ole Nkeri said the biggest chunk of the loan was taken in 2014 to the tune of Sh3 billion.

"KCB has a legal lien against four parcels, but a debenture against all assets of the company as a result of the loan that is owed to them," he told the National Assembly Trade, Industry and Cooperative Committee.

He said the cement manufacturer is experiencing difficulties servicing the loan and has on several occasions consulted with the KCB in order to restructure the repayment plan. "We have had several restructures to ensure we service the loan as and when we have capacity to," Mr Nkeri said.

The company said it spent Sh151 million of the loan acquired from KCB in 2014 to purchase three dampers and excavators from India. The machines have since broken down, yet the ones bought much earlier are still working.

A further Sh128 million was used to buy double cabin pickups and prime movers. The double cabins have been rendered irrelevant to the company's operations.

Mr Nkeri told MPs the money acquired from KCB in 2014, even though is indicated clearly that Sh2 billion was utilised in specific projects, was mainly a waste of taxpayers money.

"The Sh2 billion spent between 2014 and 2016 was a total waste of funds. Other than the grading cranes, the small precast plant and the prime movers... the rest of the projects was no value for money," he told the committee chaired by Kieni MP Kanini Kega.

The listed cement maker, which has consistently reported losses mainly attributed to mismanagement, closed its books in December with long-term loans of Sh3.6 billion compared to Sh1.8 billion reported in 2016.

The company is seeking government approval to sell at least half of 14,000 acres of idle land it owns, with the management anticipating the firm will book between Sh10 billion and Sh40 billion from this disposal.

The disclosure on the company's debt to KCB comes days after Industry, Trade and Co-operatives secretary Peter Munya revealed that the Cabinet had approved the sale of Portland's 900 acres of prime land in Athi River.


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