NSSF take over of Uganda Clays hits snag


The National Social Security Fund (NSSF) conversion of debt-to-equity in Uganda Clays may take longer than expected after the Fund revealed it needs another investor to come on board.

It has been about two years since NSSF made the decision to convert about a Shs20 billion debt owed by UCL to more shares in the clay products manufacturer. The conversion would have seen NSSF increase its stake in UCL from 32.5 per cent to about 65 per cent.

“Unfortunately, if we were to convert our debt into equity because we have seen the valuations, NSSF’s holding in UCL would exceed 49 per cent. Unfortunately, 49 per cent is the threshold that we cannot exceed on a company. What we are doing is trying to look for a co-investor. We have had some targets of co-investors,” Mr Richard Byarugaba, the NSSF managing director, told reporters recently.

Some sources in the industry have noted that NSSF’s strategy for UCL has always been to find another investor to take over from them, but the Fund does not want to risk having a large majority shareholding because it exposes them to greater risk.

Mr Byarugaba did not reveal the sort of co-investor they were looking out for, but said the transaction could be completed by end of this year.

“Anyone can tell that selling a company is not a one day job. It’s got a lot of due diligence. It has got a lot of valuations. It is a process. So that process is currently underway. We were hoping to complete this by end of this year,” he said.

The Fund is the single largest investor in UCL and in 2011, it extended a “rescue packaged loan” of about Shs11b.

The money was meant to offset high-interest charges on money UCL had borrowed from commercial banks to build a factory in Kamonkoli, Mbale District.

However, UCL has also fallen back on debt repayments to NSSF, which has also resulted in penalties, escalating the debt upwards.

About UCL

Uganda Clays Limited is listed on the Uganda Securities Exchange (USE) and its investors have not received a dividend in over five years. The value of shares in UCL has also fallen to Shs13. The company is also yet to hold an Annual General Meeting as they await a decision from NSSF.