Equity Bank loses bid to take over TransCentury in Sh4.8b debt case

He gave the two companies 120 days grace period to settle the debt. 

“The court acknowledges that premature action can disrupt the viability of a business, which ultimately affects not only the debtor but also its employees, customers, other stakeholders and the economy in general. In this regard the court finds that the applicant has established a prima facie case with probability of success and is entitled to the orders sought and in the manner proposed by the court,” said Justice Mabeya.

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

Their lawyer asserted that Equity had violated the receivership law by failing to issue a notice and giving it time to settle the debt.

Nyachoti asserted that receivership ought to be the last resort in an effort to recover a loan.

According to him, TransCentury had made payments exceeding USD 13.7 million (Sh1.7 billion) to Equity to help liquidate the debt.

He said that 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 program but that did not bear fruit,” argued Nyachoti.

He argued that appointment of receiver managers would cripple down his clients operations especially projects that were ongoing.

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 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.

In the meantime, East Africa Cables is a major manufacturer of electrical cables.

On the other hand, Equity urged the court not to intervene.