SBM Bank (Kenya) Limited has filed a petition to liquidate East African Cables #ticker:CABL after the company defaulted on a Sh285 million loan.
The legal action has been taken under the Insolvency Act 2015 which provides directions for resolving companies unable to pay their obligations.
EA Cables is part of a group of companies owned by investment firm TransCentury #ticker:TCL and which have struggled to pay various creditors including bondholders and banks.
The cable manufacturer’s biggest lenders, the Kenyan and Tanzanian branches of Standard Bank Plc, last year agreed to take a haircut on Sh1.56 billion and were paid Sh1.6 billion as final settlement.
EA Cables took new loans from Equity Bank and used the amounts to pay off StanChart #ticker:SCBK. It disclosed negotiations with Equity Bank #ticker:EQTY to also settle the remaining claims by SBM (Sh285 million) and Ecobank Kenya (Sh161 million).
SBM’s move suggests that the cables manufacturer has been unable to restructure the remaining loans.
“Notice is hereby given that a creditor’s petition for the liquidation of the above mentioned company (EA Cables) by the High Court was on December 9, 2019 presented to the said court by SBM Bank (Kenya) Limited,” reads part of the notice by the lender.
The bank invited other parties supporting or opposed to the petition to send their representatives on February 4, 2020 when the matter will be mentioned.
Prior to taking over the loans from its rivals, Equity Bank had lent more than Sh2 billion to EA Cables.
Most of the cables manufacturer’s assets are pledged to Equity Bank.
The cables manufacturer had marked land and buildings in Nairobi and Dar es Salaam for sale in a bid to raise funds for reducing its debt load.
The company has incurred annual finance costs of more than Sh500 million in recent years when its ability to deliver on contracts has been constrained.
Its short-term liabilities, for instance, exceeded current assets by Sh3.2 billion in the year ended December 2018.
It made a net loss of Sh568.3 million in the review period, narrowing the negative earnings from Sh662.8 million the year before.