The turnaround will involve weeding out “sugar brokers” who have made the prices of sugar from the company uncompetitive and retrenchment of about 300 staff.
The deal hammered at a meeting chaired by Deputy President William Ruto will see more than 50 percent of the board removed and change in the entire management.
“Audit firm KPMG will be appointed to oversee the restructuring that will see a rights issue which is expected to inject Sh4 billion to the ailing factory,” a statement from Ruto’s office indicated.
“We have to take these measures so that farmers in the region can be paid for delivery of sugarcane,” Ruto said.
Deputy President Ruto announced the measures after chairing a meeting attended by National Treasury Principal Secretary Kamau Thugge, Mumias Board chairman Dan Ameyo, Chief Executive Officer Coutts Otolo and representatives of creditors.
The restructuring starts in earnest with the board directed to notify shareholders of an Annual General Meeting and appointment of the audit firm.
Ruto said the government will release Sh1 billion within a week when the audit firm is on the ground.
The funds will be used to pay farmers outstanding arrears and put the company back to its feet.
However, he requested members of the board to voluntarily resign for failing the company or they will be phased out.
The decision was reached after month-long consultations among the lenders, the board, management, and the government.
The decision came just a day after farmers held violent demonstrations in an attempt to evict the management, whom they accused of failing to pay them for delivery of cane.
Ruto said the sugar company has to provide farm inputs at the right price and also sell its sugar at a competitive price.
Mumias Sugar Company’s current status is attributed to a string of mismanagement.
The announcement of the bailout came on a day that the sugar company said its loss widened to Sh2.08 billion from a restated loss of Sh407.4 million last year.
The firm, whose sugar output accounts for about a third of Kenya’s annual sugar output, said net revenues for the period to end December fell 62 percent to Sh2.67 billion.