Investment firm, TransCentury Limited (TCL), has accused Equity Bank of employing predatory tactics to place it under receivership over a Sh4.8 billion debt.
TransCentury, in a suit before the High Court in Nairobi, has accused the bank of swooping on the investment firm while being privy to advanced negotiations on means and ways of settling the debt.
TCL says it was taken by surprise by Equity Bank’s decision to appoint Receiver Managers even as the parties looked forward to concluding the settlement agreement.
Last week, TransCentury got a reprieve when it obtained court orders stopping Equity’s receivership bid and accused the bank of acting in bad faith and attempting to take over its operations without due process of the law. TransCentury reckons it was at an advanced stage of working with Equity on modalities of settling the debt when the lender ambushed it with the appointment of receiver managers despite availability of cash to pay the debt.
Secondary to the dispute is TCL’s decision to keep the Sh800 million raised from a recently concluded rights issue with Cooperative Bank.
Equity Bank insists that the decision to keep the money at Coop Bank and not with them, is a clear sign that owners of TransCentury are quietly divesting the funds using a different account.
“I verily believe that directors of TransCentury have started divesting the funds received from the recently concluded rights issue by picking Coop Bank as the receiving account to the detriment of Equity Bank and other creditors,” Equity Bank Legal Manager Kariuki King’ori said in court papers.
But the investment firm argues it had on June 9, 2023, informed Equity that it was awaiting approval from Fair Competition Commission (FCC) of Tanzania before accessing the funds raised from the rights issue and it planned to use part of the money to repay the debt.
TransCentury insists Equity was aware it received FCC approval on June 14, 2023, making the the Sh828 million Rights Issue funds available for use in settling the debt but the bank still appointed the receivers.
TransCentury raised over Sh830 million in the right issue and deposited the money at Co-operative Bank.
On June 19, 2023, Equity Bank announced that it had appointed Muriu Thoiti and George Weru from PriceWaterhouseCoopers (PWC) as joint administrators of both TransCentury and its subsidiary, East African Cables, in a move aimed at helping recover the debt.
Two days later, TransCentury moved to court under a certificate of urgency and obtained the order suspending a decision by the bank to appoint two receiver managers to take over the company until the dispute is heard and determined.
The investment firm has listed Equity Bank Kenya Limited, George Weru and Muniu Thoiti as respondents.
Trans Century through its lawyer, Philip Nyachoti told the court that the forceful takeover bid had prejudiced and destabilised the company’s operations even after discussing and agreeing with the bank on a road map for repayment of the loan.
“TCL informed the bank that it is in the final stages of finalising rights issues to the tune of Sh2 billion for purposes of injecting capital into the business and have enough money to offset the outstanding loan balance but they declined,” said Nyachoti.
“That as such, parties have been in extensive negotiations with a view of reconciling Equity’s account and determining the actual outstanding amount with the last correspondence being on June 12, 2023 with the bank requesting for more information about our holding company hence the appointment is premature and in bad faith,” TransCentury says in court papers.
East Africa Cables obtained a Sh1.7 billion loan from Equity between January 21, 2021 and March 10, 2021 and has since paid Sh617,076,299.