EA Cables and TransCentury get lifeline in Sh4.8b loan row

The commercial court in Nairobi on Friday handed East Africa Cables and investment firm TransCentury a major lifeline in a Sh4.8 billion row with Equity Bank.

Justice Francis Gikonyo barred the bank from either appointing a receiver manager or seeking to liquidate both firms for 90 days to allow them to pay the debt.

At the same time, the judge blocked George Weru and Muniu Thoithi, who were the appointed receiver managers, from taking over the two firms.

“The first respondent is restrained from exercising its power under the debentures to appoint administrators for a period of 90 days from the date thereof. The 2nd and 3rd defendants (Muniu and Thoithi) are restrained from acting as administrators of the applicant for a period of 90 days from the date thereof,” ruled Justice Gikonyo.

The judge agreed with the two companies’ lawyer, Phillip Nyachoti, that they were willing to settle the debt after securing funding from TLG Africa Growth Impact Fund Corporate Management Solutions (Cayman) Ltd, registered in the Cayman Islands, United Kingdom.

In the case, Mr Nyachoti argued that his clients had made efforts to fully pay the debt.

He explained that they had approached various financial institutions, including Access Bank (Kenya), Nexis Africa, Kuramo Capital and Benchmark International, for financing.

Mr Nyachoti told the court that TGL on February 3 this year agreed to shoulder all the responsibilities of paying off $8 million (Sh1.034 billion) of the loan.

“TLG agreed to provide funds to clear its debt and that of its subsidiaries, including East African Cables PLC and AEA Ltd. However, due to the complexity of the transaction, logistical challenges, and delays caused by the Christmas holidays, TLG requires an additional three months to complete its due diligence and to finalise the funding,” he told the court.

He added that his clients have also repaid Sh618 million of the loan.

Equity Bank had placed the two firms under receivership over a Sh2.8 billion debt owed by TransCentury and a further Sh1.948 billion owed by East African Cables. The lender appointed  Weru and  Thoithi as receiver managers of the two companies in 2023.

In the case, Mr Nyachoti argued that despite TransCentury and East Africa Cables raising a Sh2 billion rights issue, the two receiver managers had already “forcefully” taken over.

The lawyer argued that Equity Bank had violated the receivership law by failing to issue a notice and giving it time to settle the debt, adding that receivership ought to be the last resort to recover a loan.

He further pointed out that TransCentury had made payments exceeding Sh1.7 billion to Equity Bank to help liquidate the debt.

Mr Nyachoti said in 2016, TransCentury’s subsidiaries faced significant cash flow challenges following a substantial capital investment, which constrained its operations.

“No demand had been issued, and the appointment was unlawful. The applicant had been liquidating the outstanding debt and had made efforts to negotiate and agree on a workable programme, but that did not bear fruit,” he argued. The appointment of receiver managers, the lawyer further noted, would cripple his clients’ operations, including ongoing projects.

According to Nyachoti, efforts to negotiate with the lender had hit a dead end. “The appointment would completely cripple the applicant’s operations, especially the massive projects. The court should issue an order to prevent the respondents from denying the directors and authorised officials access to the applicant’s assets, offices, and security keys,” he argued. TransCentury is an infrastructure investment holding company with interests in Energy, transport, water, industrial, and agriculture technology, while East Africa Cables is a major manufacturer of electrical cables. 

Equity Bank urged the court not to intervene in the matter, arguing that the more time the two firms are given to foot the loan, the more interest the loans keep accumulating.

It claimed that the debt stood at Sh5.5 billion as of January 7, 2025.