Court of Appeal Allows Equity Bank to Sell East African Cables’ Properties in Sh2.2 Billion Debt Dispute

The Court of Appeal in Nairobi has ruled in favor of Equity Bank, granting the financial institution permission to sell four prime properties belonging to East African Cables PLC to recover a Sh2.2 billion loan. The decision, announced on Monday, marks a significant development in the ongoing legal battle between the cable manufacturer and the bank, though it comes with a cautionary note: Equity may face damages if the court later finds the sale breached legal protocols.

East African Cables, a leading electrical cable manufacturer in East and Central Africa, had sought an injunction to block the sale, arguing that the process was irregular and that the company was entitled to compensation of up to Sh5.5 billion. The company’s legal team contended that Equity Bank’s actions violated the terms of their agreement, particularly in light of ongoing negotiations to reconcile the debt. Despite these arguments, the appellate court dismissed the injunction, allowing the bank to proceed with the auction of the properties used as security for the loan.

The properties in question, located in Nairobi, are central to the dispute that stems from a loan advanced to East African Cables and its Tanzanian subsidiary in January 2019. Initially valued at Sh1.7 billion, the debt has since escalated due to accrued interest, with Equity Bank claiming a total of Sh2.2 billion as of the latest court proceedings. The court’s ruling permits the bank to exercise its statutory power of sale, but it emphasized that any irregularities in the process could lead to financial penalties for Equity if East African Cables prevails in its broader appeal.

This decision follows a series of legal setbacks for East African Cables. In 2023, the High Court blocked a similar attempt by Equity to sell three of the company’s properties, valued at Sh3 billion, after the cable manufacturer challenged the bank’s 90-day auction notice. Justice Josephine Mong’are had certified the petition as urgent, halting the sale pending further hearings. However, the Court of Appeal’s latest ruling reverses this temporary reprieve, signaling a tougher stance on the company’s financial obligations.

Equity Bank’s legal team, led by Kiragu Kimani and Lawson Ondieki, argued that East African Cables had failed to meet its repayment obligations, justifying the bank’s move to recover the outstanding amount. The lender also highlighted that previous attempts by the company to raise funds, including a Sh2 billion rights issue, fell short of expectations, achieving only 40% of the target. This, they argued, left the bank with no viable alternative but to proceed with the sale.

For East African Cables, the ruling is a significant blow. The company, a subsidiary of TransCentury Ltd., has been a cornerstone of the region’s electrification efforts, supplying cables to homes, factories, and infrastructure projects across East Africa. In a statement following an earlier court victory in 2023, CEO Paul Muigai emphasized the company’s commitment to its operations, stating, “We are confident of our business model and the unwavering support from our customers, staff, and shareholders.” However, the latest decision could disrupt its operations and financial stability.

The case has drawn attention on social media, with posts on X reflecting mixed sentiments. Some users noted the court’s balanced approach, allowing the sale while leaving room for potential damages, while others expressed concern over the impact on East African Cables’ business and its employees. The outcome of the broader appeal, which will determine whether Equity’s actions were lawful, remains pending and could set a precedent for similar disputes in Kenya’s financial sector.

As the legal saga continues, stakeholders await further clarity on the final resolution of the Sh2.2 billion debt row. For now, Equity Bank is poised to move forward with the sale, while East African Cables braces for the potential loss of key assets and the opportunity to seek redress through its ongoing appeal.