East African Cables is targeting to unlock Sh350 million from the sale of its non-operating assets as it seeks to generate fresh cash to support its operations.
At the same time, the Nairobi Securities Exchange (NSE) listed company expects the sale of its Tanzania subsidiary to Msufini; a manufacturer of chlorine and sodium hydroxide to help clear a significant portion of debt owed to Equity Bank Kenya.
EA Cables owes the lender Sh2 billion in a joint borrowing by the company and the Tanzania subsidiary.
Last year, Equity Bank appointed an administrator due to the default of the facility, prompting the manufacturer to seek a way out of the debacle by selling part of its assets even as it continues to fight the bank’s pursuit in court.
“The group and company are in the process of disposing some of their non-operating assets to generate operating cash flows. It is projected that this exercise will raise approximately Sh350 million once concluded,” EA Cables states in its latest annual report.
Earlier this year, the firm signed a share purchase agreement with Msufini, which at present awaits consent and approvals from regulators and key stakeholders.
The sale is expected to lead to the settlement of the Tanzania portion of the loan which has been non-performing in a move that will largely clear the default. As at December 31, 2023, EA Cables had overdue loan amounts of Sh659.7 million, payable to Equity Bank Kenya Limited.
While the company has not specified expected proceeds from the sale of the Tanzanian unit, EA Cables valued its investment in the subsidiary at Sh31.2 million after accounting for a Sh83.7 million impairment arising from the potential sale.
Meanwhile, EA Cables has sought non-loan-related support from its other financiers with the view of tapping further operational support.
“The company is also progressing discussions with other financiers to provide non-funded working capital lines to unlock idle capacity and improve performance,” noted the firm’s board Chairman Dr Michael Waweru.
EA Cables had acquired the Tanzania unit in 2005 having purchased 51 percent of its share capital. Outside of the Tanzanian subsidiary, EA Cables owns a dormant branch in Uganda but does not state its carrying value.
The firm remains a going concern with its current liabilities as of the end of December 2023 exceeding current assets by Sh2.6 billion.
Besides the loan due to Equity Bank, EA Cables has borrowings due to Ecobank Kenya (Sh129.4 million) and SBM Bank Kenya (Sh241.5 million). The firm cleared arrears worth Sh40.1 million and due to the Mwanga Hakika Bank last year.
East African Cables remained in a loss-making position in 2023 even as it narrowed its net loss to Sh301.8 million from Sh345.2 million in 2022.
The loss came as the firm registered a marginal decline in revenues amid rising administrative and distribution expenses.
East African Cables is a majority-owned investment firm by Transcentury at 68.3 percent via the latter’s ownership of Cable Holdings (Kenya) Limited.
