Court clears James Mwangi-led bank to sell EAC assets over $17 million loan

Key Points

• A Kenyan court upheld Equity Bank’s right to sell EAC’s assets, rejecting the cable maker’s appeal over a $17 million loan dispute dating back to 2019.
• The ruling ends a protracted legal battle and underscores Equity Bank’s right to enforce asset-backed loan terms despite partial repayments and ongoing settlement talks.
• EAC’s worsening finances, driven by rising costs and shrinking liquidity, have left it vulnerable as its parent, TransCentury, faces similar debt and operational challenges.

A Kenyan court has cleared Equity Bank, the flagship banking subsidiary of Equity Group, led by Group CEO James Mwangi, to auction off four properties owned by East African Cables (EAC), ending a prolonged legal dispute over a Ksh2.2 billion ($17 million) loan issued to the manufacturer and its Tanzanian subsidiary. 

The decision deals a significant blow to the financially distressed cable maker and its parent firm, TransCentury Plc, both of which have grappled with mounting debt and operational setbacks.

Appeal dismissed as court upholds bank’s rights

The Court of Appeal declined EAC’s request to stop Equity from enforcing its security, ruling that while EAC’s appeal raised arguable issues, the bank could compensate for any potential damages if the appeal succeeded. A three-judge bench upheld a previous High Court ruling that affirmed Equity Bank’s right to sell off collateral tied to the 2019 loan. 

Equity initially advanced Ksh1.7 billion ($13.16 million) to EAC and its Tanzanian unit, which grew to Ksh2.2 billion ($17 million) with interest. The debt was secured against three developed properties. EAC argued it had made substantial repayments and was negotiating a settlement when Equity moved to appoint administrators and pursue asset sales. However, the court found the lender acted within its rights under the loan agreement.

Parent company’s financial woes worsen EAC’s position

EAC, a subsidiary of publicly listed TransCentury Plc, has faced persistent liquidity challenges, reflecting the broader instability at its parent company, once a high-flying infrastructure investment firm, now weighed down by years of debt and recurring losses. This group-level fragility has severely limited EAC’s ability to refinance its obligations or access new funding. 

According to its 2024 full-year results, EAC’s revenue rose a marginal 2 percent to Ksh2.57 billion ($19.89 million), and EBITDA turned positive at Ksh179 million ($1.39 million) from a loss of Ksh20 million ($154,761). However, these gains were eroded by ballooning finance costs, which surged 43 percent to Ksh483 million ($3.74 million). This pushed its after-tax loss to Ksh358.8 million, up from Ksh301.9 million in 2023. 

The firm’s cash reserves plunged to Ksh43 million ($332,500) from Ksh105 million ($814,000) the prior year, while current liabilities exceeded current assets by Ksh2.68 billion ($20.76 million), raising red flags about its solvency. EAC’s reliance on asset-backed loans left it especially exposed once liquidity tightened.

Equity Bank to proceed with asset sales

Equity Bank’s expansion strategy is deeply rooted in inclusive growth. Under CEO James Mwangi’s leadership, the bank has significantly increased its customer base, growing from 17.7 million in 2022 to 21.6 million in 2024—a 22.03 percent rise.

The Court of Appeal’s decision effectively clears the way for Equity Bank to dispose of the secured assets, a move expected to further strain EAC’s already battered balance sheet. Interest continued to accrue throughout the legal dispute, deepening the cable maker’s repayment burden. 

The ruling reinforces the rights of lenders to enforce loan agreements, even when borrowers cite partial payments or ongoing negotiations. It also highlights a shifting financial landscape in East Africa, where distressed companies are increasingly vulnerable to enforcement by stronger, well-capitalized creditors.