Banks bar bid to reopen Pan Paper

Five commercial banks are behind the continued closure of the giant Pan African Paper Mills in Webuye, a parliamentary committee heard on Tuesday.

Industrialisation assistant minister Muriithi Ndiritu accused the banks, categorised as “short-term lenders”, of blackmailing the government into pumping more money into the beleaguered company while not doing “enough” to ensure that production resumed.

The assistant minister said despite the government giving the firm Sh1 billion in the last budget, talks with the short-term lenders to convert their Sh1.3 billion debt into equity had flopped.

“Goalposts have been shifted again and again,” Mr Ndiritu told the Committee on Implementation at Parliament Buildings in Nairobi

He cited “unwillingness” of the short-term lenders to reach an agreement on the conversion of the debts to equity.

According to parliamentary records, the banks owed money by the besieged paper mills are KCB (Sh689 million), Barclays Bank (Sh331 million), Bank of Baroda (Sh200 million), Eco Bank (Sh47.5 million) and Development Bank of Kenya (Sh67 million).

The banks, the assistant minister said, refused to sign an agreement last month saying they want Sh375 million in tax receivables assigned to their accounts, before the talks even begin.

Electricity bills

Treasury permanent secretary Joseph Kinyua added that the lenders had become “difficult” to deal with in ensuring that the firm got back to its feet.

Mr Kinyua said the Sh1 billion allocated to the firm by the government was used to pay electricity bills and salaries for “the small team that has been working there”.

The two said the banks had frustrated their efforts to re-open the factory.