Mumias lease battle; Law firm seeks removal of KCB administrator
The battle for the lease of Mumias Sugar Company continue to intensify after a law firm filed a petition seeking the removal of KCB administrator Ponangipalli Venkata Ramana Rao as the head of the company.
M/S Kimeto and Associates Advocates wants the court to revoke the appointment of Rao as the administrator of Mumias Sugar Company citing lack of integrity and competence in undertaking the company’s leasing.
“He has shown a serious conflict of interest and complete lack of fidelity in adhering to the mandatory provisions of the law in dealings with creditors,” the law firm claims in court documents.
Additionally, it wants the court to order a forensic audit of Rao’s receivership accounts dated June 29, 2020, November 10, 2020, and November 12, 2021 arguing that Rao had filed a sworn statement on receivership accounts of Sh1.5 billion, an amount that can pay off KCB’s debt with the firm.
“The proposed leasing of the Mumias Sugar Company has altogether collapsed with the administrator currently engaged in vicious legal suits all over the country with disgruntled bidders who responded to the call for the leasing of the company by a qualified investor,” Kimeto Advocates argued.
Further, the law firm wants the court to nullify the tender for the leasing of Mumias Sugar.
They want the court to order a fresh tender process which will be undertaken by the official receiver in consultation with a creditors committee appointed by the court.
“We also want the court to appoint in an interim capacity the official receiver as interim administrator for purposes of convening an initial creditors meeting to review existing proposals and viability of revival of the company,” the law firm stated in court documents.
The law firm is one of the petitioners in the insolvency proceedings against Mumias Company, having filed a liquidation petition dated March 20, 2019 over Sh76 million debt.
In 2019, KCB said it had appointed consultancy firm PVR Rao to take over the Nairobi Securities Exchange-listed firm’s operations over Sh20 billion debt.
The bank’s action was set to prompt the Capital Markets Authority (CMA) to suspend Mumias’ shares from trading on the NSE in line with the regulator’s previous response to listed firms placed under administration, such as ARM Cement.
The miller’s share price, which has been on a long-term decline on the back of losses and a dividend drought, has shed more than half of its value over the past six months to close trading at Sh0.27 yesterday, valuing the sugar firm at Sh413 million.
“KCB Group can confirm that Mumias Sugar has been placed under receivership to protect the listed firm’s assets,” KCB said in a statement, adding that this will allow the administrator to maintain operations and bring the miller back to financial stability.
The bank says it is pre-empting more punitive actions sought by other creditors, including auction of Mumias’ assets.
Unsecured creditors have gone to court and some have already obtained court orders attaching the miller’s assets.
However, the bank did not mention whether the administrator will receive new funding to help turn around Mumias, which remains closed from last year.
