The Development Bank of Ethiopia (DBE) is reviewing its selling price for the foreclosed textile company, Else Addis Industrial Development Plc. The bank had foreclosed on Else with the negotiation price of 729 million Br last week after the Turkish owners abandoned the factory and left the country with unpaid loans from the DBEof 900 million Br.
A week after asking for 729 million Br, the bank has canceled the planned sale. The bank will now conduct an asset valuation of the whole factory in a bid to fix the negotiation price tag.
Prior to the announcement of the earlier foreclosure, the bank’s experts took almost three weeks to do a valuation.
The latest amendment will give a better value to the whole plant, according to a senior bank official.
“The gap between the price and the amount of money the bank was owed by the former factory owners was wide,” explained the official.
“This happened because there were suggestions that the price tag may not fully guarantee the interest of the bank,” said the official.
The Else factory, located in Adama, in Oromia regional state, started operations five years ago. The company has a 120,000sqm factory sitting on 200,000sqm of land and has 1,000 employees. Else has been producing close to 95pc of its capacity since 2011, according to the company’s status report.
However the company couldn’t escape failure, and the Turkish owners, Seyfettin Kocak and Imam Altinbas, abandoned the factory. The first symptom was when the company failed to pay electricity charges amounting four million Br.
The former owners left the country after the bank’s request to stop them from leaving the country was rejected. The bank was unable to secure a court order to the Immigration Office to stop the owners’ departure.
The bank has now taken over the factory along with the former staff. The bank encountered some problems because the former owners had allegedly disrupted the factory machinery. They allegedly damaged some of the factory’s property, and caused the destruction of systems that monitors machine integration. However, after consultation with experts from India, the machines are now in working order, according to officials at the Bank.
This is the first experience DBE has had in administering such a large facility.
“Issues related with legal matters in the company’s operations are very challenging,” according to the same official.
Aside from loans, the owners have allegedly failed to pay close to 20 million Br to ten cotton producers. These producers have appealed to the Prime Minister’s Office, the Ministry of Trade (MoT) and the Ministry of Industry (MoI).
“So far we have got no response from the prime minister’s office,” a member of the Cotton Producers Association said.
The producers argue that they are suffering because of financial shortages.
In addition, the investors have run up a bill of millions of birr in unpaid taxes.
“Although I am not sure about the figures, the matter is under discussion with the MoI,” Ephrem Mekuria, communication director at Ethiopian Revenues & Custom Authority told Fortune, two weeks ago.
This is not the first time that a big textile factory has gone bankrupt.
In June 2016, the Commercial Bank of Ethiopia (CBE) auctioned off Saygin Dima Textile S.C. after the company failed to meet its loan obligations. In addition to the half billion Birr loans from CBE, Saygin Dima owes another 625 million Br to the Ministry of Public Enterprises. Just last week, CBE has acquired Saygin after a failed foreclosure to get a buyer.
“ I think DBE will need a separate institution to operate the companyies under similar circumstances,” commented the official.