East African Cables has suffered a setback after the Court of Appeal declined to grant orders stopping Equity Bank from selling its four properties over a loan of Sh2.2 billion.
A three-judge bench ruled that, while the cable manufacturer's case was deemed arguable, the lender was in a position to repay the money and any damages caused if EA Cables' appeal was successful.
“The ability of the bank, a tier 1 bank, to pay the damages is not doubted and there can be no reason to hold it back from exercising its statutory power of sale even in circumstances where the debt is contested,” justices Jamila Mohammed, Francis Tuiyott and Pauline Nyamweya ruled.
The four properties identified as LR. No. 209/4235, LR. No. 209/8176, LR 209/6982/1 and LR. No. 209/6982/2, were used as security for loans granted to the cable firm and its parent company TransCentury.
The lender had served the cable firm with three statutory notices in November last year, demanding repayment of the entire debt.
East African Cables moved to the Court of Appeal after its challenge to the notices was rejected by the High Court in November last year.
Through lawyer Philip Nyachoti, the cable firm argued that the notices had not been issued procedurally.
But the bank, represented by senior counsel Kiragu Kimani, opposed the application, arguing that the company had admitted the debt, which stood at Sh2.2 billion as at December 2024.
Mr Kiragu submitted that the bank would pay any damages if the appeal by the cable firm was successful.
The cable firm and TransCentury are still protected by a court order obtained in March, stopping Equity from taking over the properties for 90 days — a grace period that expires next month. Once the short-term court protection ends, Equity is expected to sell the properties.
High Court judge Francis Gikonyo had granted the firms the reprieve, directing the cable manufacturer to continue repaying the debt while seeking financiers, as pleaded.
The lender placed the two firms under receivership after declining a request to write off over Sh2.8 billion debt owed by TransCentury and another Sh2.2 billion owed by the cables firm.
According to Mr Nyachoti, TLG Africa Growth Impact Fund Corporate Management Solutions (Cayman) Limited registered in Cayman Islands, United Kingdom, had agreed to provide funds to liquidate the entire outstanding debt of EA Cables and TransCentury.
He added that the firm could not meet the earlier 120 days’ timeline granted by the court to settle the debt, due to the large sums of money involved, the complexity of the transaction and delays due to the Christmas holidays.
The investment firm further tabled evidence showing that it made efforts to settle the debt, including a non-binding head of terms dated January 13, 2025 for debt financing of $8 million offered by TLG.
In yet another letter, TLG expressed its commitment to providing financial support to TransCentury and indicated that it was actively working with Kuramo Capital to finalise provision of a debt facility that would allow for the refinancing of the debt and contribute to the stabilisation of the company’s financial position.
Equity Bank had opposed the extension arguing that the conduct of the investment firm was indicative of a deliberate attempt to abuse the court process.
