Cable manufacturer East African Cables Plc is seeking a new Sh1.9 billion loan ($15 million) to enhance production at its facilities in a quest to lift revenues and improve its financial standing.
The company revealed ongoing discussions about the loan in court filings last week even as it was granted a 120-day temporary lift from administration by the High Court over debt owed to Equity Bank Kenya.
“The applicant was in the process of negotiating a debt financing for $15,000,000 which would be used to enhance production and sales,” EA Cables said in court filings.
The court observed that initiatives undertaken by the firm, including its quest for a new loan, represent a commitment to clear arrears owed to the lender from its disbursement of a Sh2 billion facility.
The sought-after loan represents the latest attempt by the cash-stressed manufacturer to improve its financial position with prior initiatives including the sale of its Tanzanian unit and disposal of non-core assets.
EA Cables was however unable to shake off the administration as the High Court established the process had been legally executed.
Company administration is a process whereby an insolvency practitioner is appointed to restructure a business by ensuring that it is a going concern with an aim of either turning it into profitable entity or effecting its sale to preserve its value.
Equity Bank named George Weru and Muniu Thoithi as the administrators of the firm last year following a default of the facility by the manufacturer. The two were also appointed joint receivers for TransCentury.
This means the firm would slide back into administration on failure to complete repayments on the debt.
“Given the circumstances in this case, the applicant has demonstrated that given adequate time it has the means and the will to repay the debt. The first respondent (Equity Bank Kenya) holds enough securities. The court finds that in the interest of justice, administration ought to be the last resort to ensure a debtor is granted a fair opportunity to address its financial obligations before drastic measures are undertaken,” noted High Court judge Alfred Mabeya.
EA Cables also revealed that it had obtained a line of working capital of Sh170 million as it argued that its operations would stall if the administration was reinstated.
It said it had made substantial payments to Equity Bank Kenya to the tune of Sh669.5 million.
EA Cables parent firm TransCentury, which was on its part, placed in receivership by the same bank also earned a reprieve of 120 days on the order as it too proved to the court that it plans to clear its arrears to Equity.
TransCentury's outstanding debt to Equity was estimated at Sh4.4 billion ($34.3 million) as of June 8 last year.
The investment company told the High Court that it was involved in massive multi-billion shillings projects which would result in revenue generation, helping improve its financial position.
TransCentury also said it was in the process of disposing of some of its assets to liquidate part of the amount owed.
Last year, the firm raised Sh828.1 million through a rights issue to prop up its operations and financial position but failed to achieve a Sh2 billion target.
TransCentury holds a 68.3 percent stake in East African Cables via Cable Holdings (Kenya) Limited, a subsidiary.
Both TransCentury and EA Cables are listed on the Nairobi Securities Exchange (NSE).
