EA Cables seeks $9m capital from lenders
Monday June 12 2023
East African Cables manufacturing plant offices in Industrial Area, Nairobi, Kenya. PHOTO |DIANA NGILA | NMG
East Africa Cables Plc has reached out to lenders in Tanzania and Kenya for more loans to help fund a working capital gap of Ksh1.24 billion ($8.98 million) after the parent firm Transcentury Ltd failed to raise Ksh2 billion ($14.49 million) in a cash call.
The loss-making cable manufacturer, whose bank debt currently stands at Ksh2.38 billion ($17.24 million), disclosed through its latest annual report (2022) that “significant” progress has been made in the pursuit of fresh borrowings.
By December last year, the firm had overdue loans amounting to Ksh649.73 million ($4.7 million) payable on demand.
According to the report, the negative working capital has stifled operations.
“To address the issue of overdue loans, the Group and Company has commenced engagements with the lenders to restructure the debt. Business performance and projections indicate that the business will break-even and generate adequate cash flows to meet maturing debt service obligations in the medium term,” the firm said.
“To allow the business time to recover, there is need for debt reorganisation to enable sustainable market development activities, revenue growth and profitability.”
The transaction with the financiers is expected to be concluded this year.
Uncertainty
According to the report, if the group is unable to fund sufficient funds in the 12 months from April 2023, there may be uncertainty on how to continue as a going concern, making it difficult to operate efficiently.
These fund-raising initiatives include acquiring loans from financiers, sale of non-core assets and the rights issue at TransCentury.
The firm which is listed on the Nairobi Securities Exchange (NSE) did not disclose the value of the new bank loans under discussion but revealed that an additional Ksh350 million ($2.53 million) will would be raised from the sale of non- core assets to fund part of the negative working capital of Ksh1.24 billion ($8.98 million).
In April this year, TransCentury Ltd (TCL) which owns 68.37 percent of the cable manufactures realised a 60 percent undersubscription of its Ksh2 billion ($14.49 million) rights issue, only managing to raise Ksh828.1 million ($6 million).
TransCentury needed to utilise Ksh1 billion ($7.24 million) of the cash call to meet its statutory obligations, creditors and a partial repayment of TC Holding Company loan and another Ksh1 billion ($7.24 million) to shore up its working capital including that of its subsidiaries.
On the other hand, the East African Cables loss for the year ended December 31, 2022, widened to Ksh345.27 million ($2.5 million) from Ksh299.71 million ($2.17 million) in 2021.