ARM Cement Kenya Nears Deal With Foreign Investor on Stake

  • Company seeks to raise more capital than initially targeted
  • Regulator sees ARM facing `challenges' on loan repayments

ARM Cement Ltd., a Kenyan producer of the building material, is in talks with a foreign development-finance institution about taking a stake in the company and will seek to raise more capital than originally envisaged, Chief Executive Officer Pradeep Paunrana said.

The company, based in the capital, Nairobi, is in “the final lap of concluding investment details with a potential investor,” Paunrana said in an interview Monday. He declined to identify the institution that shareholders will vote on once regulatory approval has been secured.

In December, ARM announced it was in talks with a foreign institution that planned to invest as much as $125 million. The company has faced “liquidity challenges” that cast doubt on whether it’s able to meet obligations on its commercial-paper programs, the Capital Markets Authority said on Monday. In January, ARM said the foreign investment would be by way of seven-year convertible preference shares which, on conversion to equity in the company, wouldn’t be expected to reach the threshold requiring a mandatory takeover bid.

ARM has reduced its debts by about 1.2 billion shillings ($11.8 million) in the past three months and is continuing to make payments of 150 million shillings per month, Paunrana said. About half of the company’s loans are dollar-denominated and include advances of $21 million from the Eastern and Southern African Trade and Development Bank and $53 million from the Africa Finance Corp., he said.

Shares in ARM have dropped 26 percent this year, underperforming the Nairobi Securities Exchange All Share Index, which has risen 1 percent.

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