East African Cables has reached an agreement with the State Bank of Mauritius (SBM) over the restructuring of Ksh285 million ($2.85 million) debt that is due and payment on demand, giving the company a lifeline in its recovery efforts.
The agreement means the lender withdraws a liquidation petition against the firm, a Nairobi Securities Exchange-listed firm that has been making losses since 2015.
“The agreement involves a restructure of the outstanding facilities by the bank under a new long term facility and security arrangement,” said company secretary Virginia Ndunge in a public notice last week.
“The withdrawal of the petition is a significant step towards the company’s turnaround plan that includes strengthening of the balance sheet, operational improvement and having the right funding structure for growth and profitability.”
In January 2020, the firm announced that the board had been in discussion with all the lenders.
EA Cables is grappling with a huge debt portfolio amounting to Ksh3.55 billion ($35.5 million), which has eroded cash flows pushing the firm into a negative working capital position of Ksh3.27 billion ($32.7 million).
According to the firm’s 2018 annual report, it owed banks a total of Ksh3.55 billion ($35.5 million) as at December 31, 2018, of which Ksh2.56 billion ($25.6 million) was borrowed from Standard Chartered Bank Kenya and $5.32 million from Standard Chartered Bank Tanzania.
Other loans included Ksh161.52 million ($1.61 million) from Ecobank Kenya Ksh285.01 million ($2.85 million) from SBM and Ksh3.82 million ($38,200) from Credit Bank Kenya Ltd.
According to the report, out of the Ksh3.55 billion ($35.5 million) that was due for repayment on December 31, 2018, loans amounting to Ksh1.6 billion ($16 million) relating to Standard Chartered Bank Kenya and Standard Chartered Bank Tanzania were taken over by a new financier—Equity Bank—at a discount, and restructured over a tenor of 10 years, including a moratorium of two years on principal loan repayments and six months on interest repayments.
However, the loans due to Ecobank Kenya and SBM Bank Kenya, amounting to Ksh161 million ($1.61 million) and Ksh285 million ($2.85 million) respectively, were due and payable on demand.
EA Cables said it is also in discussion with Equity Bank.
“In the event that the lenders recall the loans due, the Group and Company do not have the ability to settle these loans in the normal course of business. The group is in negotiations with the new lender to take over and restructure these loans over a tenor of 10 years,” states the annual report.