Kuramo faces Sh699m TransCentury loan loss

Private equity firm Kuramo Capital risks losing a total of Sh699 million worth of loans it had advanced to TransCentury #ticker:TCL, the parent company of East African Cables #ticker:CABL, which is facing a liquidation suit.

Kuramo provided the loans between 2017 and 2018 and they were mostly secured by 56.7 million shares of the cables manufacturer with a current market value of Sh124 million.

The PE firm gave the loans in its capacity as the controlling shareholder of TransCentury where it holds a 25 percent equity.

SBM Bank (Kenya) Limited last week announced it is seeking court orders to liquidate the cables manufacturer over an unpaid loan whose size was last disclosed as Sh285 million.

If successful, the petition will see creditors including banks, take control of EA Cables and their claims will rank above those of shareholders.

The cables manufacturer responded to SBM Kenya’s legal action through a public notice, stating that it remains committed to restructuring all its debt.

The company, however, did not give details on the steps it has taken to appease SBM Kenya whose loan it had planned to replace with a new credit line from its main lender Equity Bank. “The company has continued to actively engage all the lenders and has made significance progress to complete the remaining phase which includes the debt with SBM Bank Kenya Limited,” EA Cables said in the statement.

“The company’s balance sheet has also greatly improved following the strides made with the completion of first phase of debt restructure in 2019 and will be in a better financial position to meet all maturing obligations upon completion of the remaining phase of the debt restructuring plan.”

The Kuramo loans are priced at an effective interest rate of seven percent. TransCentury first took a series of dollar-denominated loans from the PE firm worth Sh388 in 2017.

Kuramo subsequently gave TransCentury two additional loans totalling Sh311 million in February and November 2018, according to disclosures in the investment firm’s latest annual report.

The first batch of loans was scheduled to be repaid in 2018 but their maturity date has been extended to June 2020 –the time when TransCentury is now required to settle all the Kuramo debt.