The High Court has issued orders restraining Equity Bank Kenya Limited from appointing receiver managers to take over operations of East Afrian Cables PLC over Sh 4.4 billion debt.
Justice Francis Gikonyo issued the orders which will run for a period of 90 days from 20th March 2025.
“The 1st respondent is restrained from exercising its power under the debentures to appoint a receiver or receiver-managers for a period 90 days from the date hereof,” the judge ruled.
The judge also issued similar orders for Transcentury PLC, EA Cables parent company.
The Commercial and Tax court also restrained the 2nd and 3rd respondents (George Waweru and Muniu Thoiti) from acting as receiver/managers of E.A Cables for a period of 90 days.
However, Justice Gikonyo ruled that if after the lapse of that period, the EA Cables shall not have repaid the debt, Equity Bank shall exercise the power in the debenture and appoint receiver/receiver manager for the applicant.
EA Cables moved to court seeking orders restraining the lender from taking over its operations over the said debt.
On 18th October 2024, Justice Alfred Mabeya granted EA Cables 120 days to settle the debt, future to which, the company would be put under receivership.
Through lawyer Philip Nyachoti, the company told the court that following the said ruling, it has made efforts to pay the debt by approaching various financial institutions.
It was the the applicants’ case is that it approached various financial institutions including Access Bank (Kenya) PLC, Nexis Africa, Kuramo Capital, Benchmark International and TLG Africa Growth Impact Fund Corporate Management Solutions (Cayman) Limited registered in Cayman Islands, United Kingdom (“TLG”) to secure funds to liquidate the said debt.
EA Cables produced a non-binding head of terms dated 13th January 2025 (valid until 21 January 2025) for debt financing of USD 8 million offered by TLG.
It also produced a letter dated 3rd February 2025 from TLG to the 1st defendant captioned “Request for 12 Week extension of deadline to facilitate refinancing of Transcentury’s Group’s Equity Bank Ioan”.
In that letter TLG expressed its commitment to providing financial support to EA Cables’ outstanding obligations to the bank.
Nyachoti further indicated that the company was actively working with Kuramo Capital to finalize provision of a debt facility that will allow for the refinancing of the debt and contribute to the stabilization of the plaintiffs financial position.
He added that the reason advanced for the non-compliance with the timelines is the due diligence process which should take longer because of the magnitude of the debt and the delays occasioned during the Christmas holidays.
On the other hand, Equity Bank argued that TLG is a stranger to it hence unreliable. The lender added that TLG’s letter was received a day before the hearing.
Justice Gikonyo ruled that indeed, the evidence produced by the plaintiff shows that it made efforts to settle the debt.
“The proposal by the applicant is to pay up the debt; and has put in place arrangements with potential investors. It appears reasonable, and will resolve the dispute once and for all,” the judge ruled.
In addition, the court ruled that the extension of time does not rout the remedy to appoint receiver managers as was ordered by the court, but, is likely to ensure sustenance of the company as a going concern and repayment of the debt.
“Accordingly, in the interest of justice, there is sufficient reason to review the time for repayment of the debt and appointment of the receivers. Nevertheless, any such extension should be given once to avoid prejudice to the defendants or unwanted habit by the applicant,” the judge noted.
