East African Cables seeks to raise additional capital

East African Cables is considering raising new capital from shareholders to run its operations which have been constrained by high finance costs and inadequate funds to deliver contracts.

The company is also seeking to sell assets worth Sh640 million to reduce its debt burden.

The Nairobi Securities Exchange-listed firm, which is owned 68.4 percent by investment firm TransCentury, has disclosed the planned balance sheet restructuring in its latest annual report.

“The group and company are also exploring ways of optimising its capital structure which could involve raising of additional equity into the business which will be utilised to recapitalise the business,” the company says in the report.

The proposed additional funding could be provided by existing shareholders through a rights issue or the company could invite a new strategic investor.

Timelines and size of the capital raise from shareholders was not indicated but the assets disposal is likely to occur in the short term.

“The group and company are holding non-production assets valued at Sh640 million. There is an understanding with the lenders that once the group and company identifies a buyer, these assets will be sold and the proceeds utilised to partly reduce the debt levels and partly be availed for working capital.”

EA Cables has marked land and buildings in Nairobi and Dar es Salaam for sale.

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.