In financial difficulty, Kenyan cementist ARM Cement has just won a decisive round in its fight for survival: the International Finance Corporation (IFC) will finance the purchase of 12 billion shillings of its debt ($ 120 million).
The financial terms of the operation, which will become effective in 2019, were revealed today by the Business Daily. Specifically, ARM will buy back – with the support of IFC – a portion of its existing short and medium-term debt, which is relatively expensive (up to 17.5% annual interest rates), to replace it with the new borrowing terms of its institutional creditor (6% annual interest and a maturity of 10 years), which are significantly more favorable. “We are restructuring our balance sheet to allow the company to recover,” said Pradeep Paunrana, the CEO of ARM Cement, quoted by our colleague from Nairobi. The announcement of this agreement comes shortly after the first non-payment of the cement, ARM Cement has not been able to honor a recent financial commitment on a portion of its bond debt, due June 6.
The IFC would have proposed a $ 50 million equity investment in the cement company. But, determined to obtain better conditions, the management of ARM apparently play the watch, the CEO of the company having recently recalled that “the current price of the stock underestimates the company considerably (the title evolves today around 4 shillings against nearly 100 in 2014) “. He is therefore betting that the valuation of the firm he manages will increase substantially by next year, when the agreement will be implemented. In the meantime, the value should remain very volatile: after an initial rise of nearly 10%, the announcement of the agreement, the title lost Wednesday close to 13% on the Nairobi Stock Exchange.
