High court has slammed the breaks on Equity Bank’s attempt to seize two listed companies TransCentury and East Africa Cables over unpaid debt, stating that the move was premature. Equity Bank seized TransCentury after the Kibaki-era investment firm raised Kes828 million instead of Kes2 billion from a cash call.

Part of the money raised from the rights issue was meant to pay off Equity Bank’s debt and the bank sought to place TransCentury and its subsidiary East African Cables (EAC) under receivership to prevent the company directors from accessing the raised funds.

The move now means TransCentury and EAC can continue with their business unhindered until their case is heard and determined. What's more, Judge Alfred Mabeya gave the companies the green light to "continue with engagements" and negotiate with Equity Bank to come to an "amicable resolution" on loan repayments.

“I am glad that the brief setback that this unfortunate action had brought to the business is behind us and we can now focus on what we do best, providing quality cables to our customers across the region," said EAC chairman Dr. M. G Waweru on receiving the injunction in June pending the now concluded hearing.

The company argued that by the time Equity appointed George Weru and Muniu Thoiti as its joint receivers on 16 June 2023, its biggest shareholder, Kuramo African Opportunity Kenyan Vehicle Ltd (Kuramo), "had not received its allocation and therefore, the Rights Issue was not complete."

Read also: Bankruptcy takeovers are triggering wider corporate concerns

Total collapse of TransCentury

The Nairobi Securities Exchange-listed cable maker added that it had no access to the funds as alleged by Equity and therefore the lender's claim that EAC was guilty of non-disclosure on the transaction cannot hold.

In seeking dismissal of the application, TransCentury said that allowing the receivership application to proceed may lead to total collapse of the company.

In early June, Equity placed Trancentury and EAC under receivership after declining a request to write off over Kes2.8 billion ($20 million) debt owed by TransCentury Plc and another Kes1.948 billion owed by its subsidiary EAC.

However, on 19th June, the debt-straddled companies countered by seeking court orders to bar Equity from appointing receiver managers. The court granted these orders on June 26th.

In its case, Equity Bank argued that Transcentury, which has sought fresh capital through a rights issue, but only managed to get Kes828 million, which was not enough to pay off its debt.

However, Transcentury said that it engaged Equity "as a partner and in good faith, in pursuit of an amicable agreement for the payment of the debt owed."

Following the ruling, both Transcentury and EAC can continue making their loan payments to Equity and demonstrating a commitment to meet their obligations.

The infrastructure company told the court that talks on the settlement of the dent were ongoing when Equity appointed George Weru and Muniu Thoiti as receiver managers and that "the exact amount due and owing has also not been ascertained and/or agreed upon."

[email protected]