To many people, being an undertaker is considered an undesirable profession owing to its close proximity to death, something that is universally feared. Sadly, Insolvency Practitioners (IPs) are viewed with similar trepidation as their arrival typically heralds the demise of a company.
When insolvency is inevitable, it is important for there to be a solution that minimizes losses, protects creditors and develops a rescue strategy where the business is viable. The newly-enacted Insolvency Act 2015 provides an alternative to liquidation procedures that enables the affairs of the insolvent company to be administered for its benefit as well as the benefit of its creditor.
Corporate restructuring features strongly in today’s corporate environment. Businesses are looking for original solutions that will help them to achieve their commercial objectives while mitigating risk exposure.
IKM has a formidable reputation for cutting-edge advice, which has seen the firm involved in many novel and complex transactions.
Our corporate team in Kenya works seamlessly with experienced colleagues from other practice areas in the firm to coordinate multifaceted transactions, deal with regulatory requirements, advise on tax matters, manage due diligence investigations and prepare all the required documentation.
Experience has included advising:
- A leading bank in Kenya in the negotiations and amicable settlement of a matter in which the bank was seeking to recover USD100 million from a group of schools and a chain of hotels in Kenya that were under receivership.
- A listed bank on the recovery and restructuring options available for facilities extended to a state-owned entity in the extractives space. The scope of work involved advising the bank on inter-lender arrangements, reviewing and advising on facility agreements, debt restructuring and repayment negotiations with the borrower.
- Multiple prominent banks and a development finance institution on the restructuring of facilities extended to ARM Cement PLC, a listed cement company with operations in Kenya and Tanzania. We continued to advise the lenders when the company became one of the pioneer administrations under the new Insolvency Act, 2015.
- One of Kenya’s largest banks on the debt recovery for one of its distressed borrowers involved in the manufacture of building products. We have advised on structuring the sale of the charged assets under a power of sale, exploring several complex re-financing options involving a Mauritian fund and ultimately negotiating a settlement agreement and assisting to implement the transfer of assets in the settlement of the debt.
- Two leading banks in Kenya on the recovery of sums owing from a manufacturer under various credit facilities. Our role has involved reviewing the security documents, advising on the rights of the lenders and drafting and negotiating a standstill agreement. We are now supporting the lenders as they consider a sale of the debt and assignment of securities.
- A large family-owned business in East Africa on obtaining business rescue finance, company-controlled insolvency options, calling up guarantees, the potential sale of key assets and the attendant tax implications.
- Advising a large regional banking group on the restructuring of a loan facility to a commercial real estate developer in Rwanda. This involved developing the conditions for the restructure including an enhanced security package and the appointment of independent project managers.
- One of Kenya’s largest banks on appointing a receiver- manager at a large sugar company including advising on injunctions sought by other secured and unsecured creditors.
- Multiple banks and an international fund on the restructuring of debt owed by a borrower in the transportation sector. The scope has involved advising on consensual and enforcement options, dealing with a winding-up petition and attempts to auction assets and more recently a buyout option.
- KCB Group Plc in its proposed acquisition of certain assets of Imperial Bank Limited (in liquidation).
- A listed bank to protect its rights as a secured creditor when the borrower sought to have a decree from a European court recognised in Kenya in relation to a voluntary arrangement with its creditors.
- A leading Kenyan bank in a dispute resolution matter where a company had challenged the bank’s right to appoint receivers over the company as well as the bank’s rights to exercise its statutory power of sale in a bid to recover a debt of more than KES643 million (USD7 million).
- Restructuring Team of the Year (Africa Legal Awards 2022)
Anyone who has watched a zombie movie will tell you that there is only one thing to do when confronted by a zombie – run. Like the zombie of the screen, zombie companies exist somewhere between the living and the dead. A zombie company continues to trade but has not generated sufficient cash flows to service its debt for 3 years or more. It can remain condemned to financial limbo for many years unless its creditors take action to either wind it up or resuscitate it.
Many countries have introduced insolvency reforms in the recent past, partly in an attempt to enhance their legal frameworks and partly to respond to exigencies stemming from the COVID-19 pandemic. From a Kenyan perspective, amendments to insolvency laws have been made through recent Business Laws Amendment Acts but we also note that a draft Insolvency Amendment Bill, 2020 (Bill) was published on the BRS website, and contains some proposals that are worth pondering.
Energy and infrastructure projects have for the longest time attracted the attention of ESG (environmental, social and governance) regulators and watchdogs. More recently however, ESG concepts have gained prominence in almost all other sectors of the global economy as boardrooms all over the world move to integrate ESG principles and metrics in their decision making.
In recent years, the media has been smattered with reports of companies in deep financial distress. Prominent among them are major leaguers such as Nakumatt Holdings, ARM Cement and more recently, Mumias Sugar Company. As observers collectively ponder what went wrong with these companies, market players are keenly watching to see if the provisions of the Insolvency Act, 2015 can help to put the situation right, keeping in mind that there may be many more casualties in the pipeline as a result of the COVID-19 pandemic.