Treasury awaits Uchumi bailout proposal, ready for stake dilution

The government has indicated it stands ready to bail out Uchumi Supermarkets, as one of the retail chain’s shareholders.

The Treasury however says Uchumi must come up with recovery proposals, which it will then participate in as one of the shareholders.

“They have to come up with proposals on what support they need. They are working with the Ministry of Industrialisation and Enterprise on what support they need from shareholders. The proposals will then be presented to shareholders who will make a decision. As you know, I am (Treasury) one of the shareholders like any other,” said Treasury Cabinet Secretary Henry Rotich in an interview.

The government is the second biggest shareholder in the listed company with 14.6 per cent stake behind Jamii Bora’s 15.8 per cent shareholding.

Industrialisation CS Adan Mohamed said in an interview that Uchumi will first have to look at its assets, then come to the shareholders where government will play its role as any other shareholder before considering what else to do for the retailer.

“The conversation we are having with the management is on a working strategy on how to bring it back to life. The government will not write cheques for failing companies. We can only pump in money when there are extra resources,” said Mr Mohamed.

READ: Analysts paint a gloomy picture of Uchumi share's future

Mr Adan admitted that like other shareholders the government faces the possibility of a dilution if Uchumi issues shares to a strategic investor.

The retailer intends to raise Sh5 billion from a strategic investor in exchange for a majority shareholding to retire its debt and return to profitability.

Support by government is however key to confidence for the retailer’s creditors who are owed Sh6.1 billion.

Uchumi has been sued by five suppliers who want it wound up over delays in settling its debt. The retailer owes suppliers Sh3.6 billion with another Sh2.5 billion debt held by banks with charged assets.

Some of the suppliers have however backed Uchumi including agreeing to a debt to equity swap and are hoping that the government is also willing to put in money.