A court gavel
Two investment firms have been granted a reprieve after a commercial court approved their request for additional time to settle an outstanding debt of Sh5 billion owed to Equity Bank.
Justice Francis Gikonyo allowed East Africa Cables Limited and TransCentury 90 more days to clear the debt. Previously, on October 18 last year, Justice Alfred Mabeya had granted the firms a 120-day grace period, citing their demonstrated willingness to settle the debt. However, in February this year, the firms filed an application seeking additional time to meet the repayment obligations.
Through their lawyer Philip Nyachoti, the firms explained that significant efforts had been made to secure financing for the debt’s settlement.
He explained that since the October orders issued by Mabeya, TransCentury and East Africa Cables Limited put several mechanisms, arrangements and programmes and systems towards liquidation of the debt.
He told the court that it approached several financial institutions to secure funds to liquidate the debt among them a company registered in the Cayman Islands.
Nyachoti told the court that the company identified as TLG accepted to avail funds to liquidate the outstanding debt. He explained that it couldn’t comply with the 120-day timeline due to the complexity of the transaction, logistical challenges and delays caused by the Christmas holidays.
It submitted that TLG requires an additional three months to complete its due diligence and to finalise with the funding. Nyachoti produced letters and other documentation before court as proof.
But the defendants in the case argued that the firms had not demonstrated discovery of any new and important matters of evidence that would warrant a review or extension of time.
Justice Gikonyo in considering the arguments presented by both parties allowed the application filed by the investment firms.
“It is in the interest of justice for the court to balance the scales between the plaintiff, a large trading company, and the first defendant, a secured creditor. The court ought to take a course that appears to carry the lower risk of injustice,” the judge said.
The judge took into consideration the account statements filed by the firms showing that some amount had been paid towards settling the debt. This he said, indicates good faith by the East African Cables in making the repayments.
He also said that the firm was able to demonstrate that negotiations with TLG are on course and due diligence is underway.
“This is not a case where the borrower is running away from its obligations but rather seeks an arrangement to ensure the company is spared as it restructures the debt,” he said.
The judge explained that if the firms are placed under administration at this juncture, the ongoing negotiations will be disrupted and hamper efforts to stabilise and loss of confidence from investors and stakeholders.
“Accordingly, I am persuaded that there is sufficient reason for a review of the orders of October 18 through an extension of the timeline required for compliance. I opine that an extension of 90 days presents a lesser injustice in the circumstances,” Justice Gikonyo ruled.
