- The appointment of the administrator paves the way for the two banks to restructure the cement company and recover the debt owed.
- It had requested to be given more time as it is currently struggling to fund its clinker project
High Court has allowed Kenya Commercial Bank and Absa Bank Kenya to appoint an administrator to recover over Sh10 billion owed by financially strapped, Savannah Cement.
In his ruling delivered yesterday, High Court Judge Alfred Mabeya held that, following Okwany J’s delivery of the ruling dismissing the injunction application, the application for her recusal had been overtaken by events.
Late last year, the cement maker obtained a temporary order blocking any seizure of its assets or the lenders from appointing an administrator or liquidator to manage its properties.
Savannah Cement has been in court for the past year, disputing the debt of over Sh7 billion owed to KCB Bank and over Sh3 billion owed to Absa Bank.
The lenders had on December 19 last year received the court's nod to seize assets belonging to the cement firm, an order that was reversed by the Supreme Court the following day after Savannah contested.
Savannah argued that there was a pending application for the judge's recusal. Even so, it was ordered to pay Absa Sh10 million within one week from the date of the ruling to avoid the seizure of its assets.
The cement maker argued that it will suffer huge losses that cannot be compensated since the banks are eying assets that might never be recovered, including machinery and land.
It added that it has several contracts to supply cement to various government projects, which will automatically be terminated if the banks are allowed to seize its assets.
It had requested to be given more time as it is currently struggling to fund its clinker project, which allows it to raise sufficient funds and clear the debts.
Absa Bank had appointed Harveen Gadhoke, a well-known and experienced insolvency practitioner, as the administrator, which KCB supported as the two banks have signed an inter-lenders agreement in which they undertook to cooperate with each other in realizing the assets charged to them.
Court documents show that Savanna has defaulted on the loan repayment with KCB interest standing at close to Sh300 million, including a penalty of Sh13.5 million.
The appointment of the administrator paves the way for the two banks to restructure the cement company and recover the debt owed.
The cash-strapped cement company temporarily "shut down" its Athi River giant plant in late 2021. The facility had been dormant for one month.
The financial problems dogging the private cement processor seem to have escalated a year after it launched a new Sh5 billion grinding plant and fired 21 senior employees.
Savannah was also hit by ownership wrangles and protracted court battles in recent years.
In May, the Court of Appeal quashed the appointment of new directors.
The new plant was expected to grind 1.2 million tonnes of material per year and was meant to double the firm’s production capacity, but insiders said the returns were minimal.
The Sh8.5 billion Savannah began cement production in 2012 as the sixth processor based in Athi River with an annual production capacity of 1.5 million tonnes.
The company is being placed under receivership a month after its subsidiary, Savannah Clinker announced receiving funding amounting to Sh65 billion ($500 million) for the construction of a new clinker factory as the race for control of the crucial cement-making raw material heats up.
Savannah Cement Group chairman Benson Ndeta said it raised the funds through a privately placed debt arrangement with the bond set to be listed at a regulated international exchange.