East African Cables to sell loss-making Tanzanian unit to ease debt
TLDR
- East African Cables raises Ksh31.29 million from Tanzania subsidiary stake sale amid financial distress.
- Impaired by over Ksh83 million last year due to persistent losses, company aims to ease substantial debt burden.
- Equity Bank appoints administrators, impacting East African Cables' reputation among investors and lenders.
East African Cables has managed to raise only Ksh31.29 million ($234,713) from the sale of its stake in its Tanzania subsidiary. The investment was impaired by over Ksh83 million ($628,426) last year due to persistent losses, according to the company's financial report.
This sale is part of the cable manufacturer's efforts to mitigate further financial distress amid substantial debt. The company owes banks around Ksh2.41 billion ($18.24 million), with the bulk of it — Ksh2.04 billion ($15.44 million) — owed to Equity Bank.
Listed on the Nairobi Securities Exchange, East African Cables is grappling with limited options after Equity Bank appointed administrators to take over its operations following a default last year. The company's latest annual report indicates that the attempted receivership has adversely affected its reputation among investors and lenders.
Key Takeaways
East African Cables is considering several strategies to alleviate its financial distress. These include the sale of non-core assets, receiving support from its parent company, TransCentury, and the recent sale of its loss-making Tanzania subsidiary. Additionally, EAC is in discussions with other financiers to secure non-funded working lines to activate idle capacity and enhance performance. Despite its financial troubles, EAC's shares have not been suspended from trading on the Nairobi Securities Exchange, thanks to a court injunction against the administration process. The company's negative working capital worsened significantly, growing to Ksh2.63 billion ($19.91 million) in 2023 from Ksh1.24 billion ($9.38 million) in 2022.
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