ARM has been seeking an investor since October to help stem losses that more than doubled to KES 6.55 billion last year.
Kenya based ARM Cement is yet to reach an agreement with the International Finance Corp (IFC) about a capital injection in the struggling Kenyan company, said Pradeep Paunrana CEO of ARM Cement.
Business Daily, a Kenyan newspaper, reported on Wednesday that the IFC had agreed to take over $120 million in loans in a bid to settle ARM’s more expensive debt. Paunrana said the company is in discussions with the IFC on a term sheet and a full agreement is still a “work in progress.”
“Nobody just gives you $120 million without conditions,” Paunrana said by phone from Tanzania, where ailing operations have hurt the group’s overall performance. “We are in discussions, it is not a facility, it is a term sheet. There are conditions attached to this.”
The main conditions include a return to profitability and getting an equity investor during the next nine to 12 months, he said. ARM’s focus is now on getting its Tanzanian plant fully operational, generating positive cashflow, as the company seeks to reduce the debt and refinance the balance, he said.
The company is struggling under the weight of its$142.8 million ballooning debt at the end of 2017 as well as defaulting on a coupon payment for a $10.3 million loan in June which carried a 17.5 percent interest rate, according to a note by EFG Hermes Kenya.
Paunrana said earlier this week that ARM would convert KES 21.6 billion owed by its Tanzanian unit, Maweni Limestone, into equity. The company didn’t provide for the impairment of the investment in its 2017 financials, according to auditors.
The business environment in Tanzania has improved “markedly” after coal supplies increased and cement retail prices went up, Paunrana said. ARM’s clinker plant in Tanga is operating at near full capacity and could supply Kenya with some of the cement-making ingredient, he said.
Tanzania was “very weak” in the past 18 months and a lost a number of key personnel because of the uncertainty, he said. ARM plans to rehire staff to strengthen its management.
“We are reviving the business, strengthening management and getting to a position where whenever we bring equity, it is at most favorable terms to the lenders and shareholders,” Paunrana said.