Equity Group Holdings (EGH) Ltd has taken over more than $ 20 million in loans owed by the loss suffered by East African Cables Ltd as part of a major debt restructuring plan to put the manufacturer back on a solid financial footing .
The restructuring will result in the refinancing of East African Cables’ existing debt over a longer period to allow it to inject cash flow back into the business and reduce monthly loan principal repayments.
The savings from the transaction should be recognized in the financial statements for the year 2019 which was carried over to July 31.
The East African Cables, which is listed on the Nairobi Stock Exchange, is grappling with a huge portfolio of Ksh 3.55 billion ($ 35.5 million) debt on its balance sheet which has eroded its flows cash flow, pushing it into a negative working capital position of Ksh 3.27 billion ($ 32.7 million).
The debt, according to the company’s 2018 annual report, is owed to several banks, including Standard Chartered Bank Kenya, $ 25.6 million, and Standard Chartered Bank Tanzania, $ 5.32 million.
The other lenders are Ecobank Kenya Ltd, $ 1.61 million, the State Bank of Mauritius, $ 2.85 million and Credit Bank Kenya Ltd, $ 38,200. The debt was due to be repaid on December 31, 2018.
As a result, Equity Bank took over loans in the amount of Ksh1.6 billion ($ 16 million) relating to Standard Chartered Bank Kenya Ltd and Standard Chartered Bank Tanzania Ltd at a discount and restructured them over a term of 10 years, including a two-year moratorium. on loan principal repayment and six months on interest repayment.
At the same time, the company opened a discussion with Equity Bank to take over and restructure over a period of 10 years the other loans owed to Ecobank Kenya Ltd and SBM Bank Kenya Ltd in the amount of Ksh 161 million (1.61 million) and Ksh 285 million ($ 2.85 million). ), respectively, which were due and payable on demand. This brought the total loans acquired by Equity Bank to $ 20.46 million.
“The Group and the company have entered into discussions with a new lender (Equity Bank) which has taken over the debt to Standard Chartered Bank Kenya Ltd and Standard Chartered Bank Tanzania Ltd as of December 31, 2018”, said East African Cables in its annual report from 2018.
“Discussions are progressing to finalize the resumption of loans owed to the other two lenders, Ecobank Kenya Ltd and SBM Bank Kenya Ltd. The new lender offered the group a 10-year term with a two-year moratorium on principal repayments and a six-month moratorium on interest payments.
In May, East African Cables announced that it had reached an agreement with SBM (formerly Chase Bank) to restructure Ksh 285 million ($ 2.85 million) debt due and payable on demand.
The deal saw SBM withdraw a liquidation petition against EA Cables.
“The deal involves a restructuring of the current facilities by the bank as part of a new long-term facility and security agreement,” Company Secretary Virginia Ndunge said in a public notice.
“The company has continued to actively engage all lenders and has made significant progress in completing the remaining phase which includes debt with SBM Bank Kenya Ltd.”
Company general manager Paul Muigai was unable to answer our questions via email as of press time.
EAC has manufacturing facilities in Kenya and Tanzania and a presence in Uganda, Rwanda, Burundi, South Sudan and eastern Democratic Republic of the Congo, through a distribution network.
The company, 68.38% owned by Kenyan infrastructure investment firm Transcentury Group, recorded losses amounting to Ksh 568.38 million ($ 5.68 million) and Ksh 662.83 million. Ksh ($ 6.62 million) in 2018 and 2017 respectively.
In 2016, losses amounted to Ksh 583 million ($ 5.83 million) compared to Ksh 741 million ($ 7.41 million) in 2015.
In 2014, the company achieved a net profit of Ksh 341 million ($ 3.41 million).