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Kenya: Press Releases: Trans-Century, Citadel Agree on Restructuring of Rift Valley Railway (RVR) |
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Tuesday, 23 March 2010 |
Lead investors in the vital national railway of Kenya and Uganda agree a way forward that includes USD250m in much-needed capital expenditure to upgrade both infrastructure and rolling stock.
Trans-Century Limited, the fastest growing African investment company based in Kenya, focused on making high growth investments across Sub-Saharan Africa, and Ambience Ventures Ltd, a subsidiary of Citadel Capital, the leading private equity firm in the Middle East and Africa with USD8.3bn in investments under control, have agreed to a joint solution for the restructuring of Rift Valley Railways.
Upon the closing of this transaction, expected mid-April 2010, the shareholding structure in Rift Valley Railways will be 51% to Ambience Ventures Ltd, 34% to Trans-Century and 15% to the Ugandan investor.
Both companies appreciate the importance of Kenya’s and Uganda’s national railway and are committed to executing a successful turn-around of Rift Valley Railways. The two companies have thus agreed to work in close partnership to secure:
The required capital injection to fund investment in much-needed capital expenditure;
- The development of a sustainable business and investment plan, which includes a capital expenditure programme of USD250m to rehabilitate the infrastructure and rolling stock;
- Strengthening of the company’s management and the provision of required technical expertise;
- Leadership of the negotiations with the governments of Kenya and Uganda, to revitalise the concession and facilitate the development of the standard gauge railway that the governments are desirous of building.
Both Trans-Century and Citadel Capital realise that the Joint Railways Concession is critical for the economic development of the region and have agreed to a negotiated solution to help fast-track the turnaround of Rift Valley Railways for the benefit of the peoples of Kenya and Uganda.
Trans-Century and Citadel Capital are committed to ensuring that the railway service that is such a crucial part of our region’s infrastructure is able to deliver on its promise.
Finally, both companies would like to extend their gratitude to the Governments of Kenya and Uganda for both their patience and for their foresight in providing the necessary time and circumstances to allow for this understanding to have been reached by both parties.
Ambience Ventures Ltd. presently holds a 49% stake in Sheltam Railways, the largest single shareholder in Rift Valley Railways (RVR), giving it an effective 17.5% stake in RVR. Trans-Century holds a 20% direct stake in RVR.
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From the initial consortium all the South African expatriates were terminated at the end of 2008 to date they have not been paid the monies due to them. Deals were brokered with RVR to correct this travesty of justice and RVR and its management have blatantly disregarded the signed commitments.
The commitment was that RVR would pay the monies owed to the 18 or so former South African expatriates over 12 months starting on or before the 1st January 2010. Any missed payment would result in RVR having to pay immediately the total sum due to each person.
The January deadline was missed and so was the February deadline, these two instalments were only paid in the middle of February. Again to date March, April and Mays instalments have not been paid and June’s one is now looming too! Not only is the company incapable of honouring its contractual obligations it cannot even honour its moral obligations! In terms of it’s contractual obligations all expatriates should have been paid in full in January as the 1st payment, never mind the subsequent 4 payments have breached the terms of the company’s contractual obligations and in terms of that breach the entire amounts owing to former employees should have been paid and have not been!
To compound its transgressions RVR have used some very questionable ethics to minimise their cash outflow exposure. The majority of the monies owed were the company’s contractual contribution to retirement funding. The company never put a retirement funding vehicle in place and thus has passed the tax burden on these funds onto the individuals rather than bearing it itself as was the publicised case to the expatriates when they were terminated. Further, expatriates were withheld from the RVR payroll until such time as their Kenyan work permits were granted; in the interim they were paid by Sheltam and contracted to RVR through the Sheltam management agreement with RVR. RVR is now also taxing the individuals on this pay which legally they cannot do as none of the expatriates were legally tax resident in Kenya at the time.
All of the above is significant in the lives of the individuals that contributed to RVR in the first two years of the concession as they now have to just accept less than 20% of the supposed amounts owed to them. With many having their contracts terminated 3 years or more earlier than contracted for, the global recession etc they are facing immense personal hardship at the expense of corporate wranglings and nobody seems to care!
Hopefully Citadel will?