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Nakumatt fights to stop auctioneers in TRM rent war

The suit papers show that Nakumatt owed the mall owners Sh51,896,027 by June 7, but do not indicate how long the retailer has been in rent default. PHOTO | BD GRAPHIC
The suit papers show that Nakumatt owed the mall owners Sh51,896,027 by June 7, but do not indicate how long the retailer has been in rent default. PHOTO | BD GRAPHIC 

Retail chain Nakumatt’s troubles have deepened after one of its creditors, Thika Road Mall (TRM), attached large amounts of the supermarket’s goods and equipment seeking to recover Sh51 million in rent arrears.

TRM, through Moran Auctioneers, seized a number of Nakumatt’s assets, including six moving trucks, 400 customer trolleys, office furniture, ovens and other electrical appliances, forcing the retailer to rush to court for an order temporarily suspending the auction.

Court documents indicate that TRM had taken the drastic action after prolonged negotiations to unlock the rent arrears impasse failed.

Nakumatt wants the court to stop TRM’s owners from selling its assets to recover rent arrears, and to bar them from evicting the retail chain from the Roysambu-based facility.

The suit papers show that Nakumatt owed the mall owners Sh51,896,027 by June 7, but do not indicate how long the retailer has been in rent default.

Nakumatt and TRM have asked the court to grant them until July 19 to negotiate a settlement that may lead to a withdrawal of the suit.

The action comes at a time when Nakumatt is battling a separate insolvency petition filed by one of its top suppliers, who is seeking to recover Sh70 million in unpaid debt.

African Cotton Industries Limited, the manufacturer of popular tissue paper and sanitary towel brands such as Tena, Flora and Medicott, says in its petition that talks with Nakumatt since May last year have not borne fruit.

The consumer goods manufacturer reckons that three cheques that Nakumatt issued in March this year totalling Sh11 million have bounced, eroding confidence in the state of its finances.

Nakumatt says in the suit it has filed against TRM that the attachment of its assets is illegal as there are active insolvency proceedings against it in court.

“In view of the said insolvency proceedings, the proclamation notice dated June 8, 2017 violates the provisions of Sections 429 and 430 of the Insolvency Act and the same is therefore illegal, null and void.

Nakumatt undertakes to put TRM into funds once the proposed reorganisation and recapitalisation of Nakumatt’s business is finalised,” the retail chain’s managing director, Atul Shah, says in court papers.

Sections 429 and 430 of the insolvency law bar attachment of any assets owned by a firm that is facing liquidation proceedings in court.

Nakumatt is also accusing TRM of breaking the law by taking hold of items that are exempt from attachment. “A section of the goods which have been proclaimed are exempt from attachment such as the 400 customer trolleys, which constitute Nakumatt’s tools of trade and 11 packets of KCC Delite yoghurt, which are perishable goods.



Thika Road Mall in Nairobi. FILE PHOTO | EVANS HABIL | NMG
Thika Road Mall in Nairobi. FILE PHOTO | EVANS HABIL | NMG

Some of the proclaimed goods such as the commercial photocopier and new furniture items do not belong to Nakumatt,” the retail chain says, even as it blames new laws capping interest rates for its recent troubles.

Nakumatt says the laws, passed in August last year, have made it difficult to access the short- to medium-term credit it relied on to run the business.

“It therefore became necessary for Nakuamatt to negotiate fresh terms with financial institutions and repayment terms with its creditors with the emergence of these unforeseen circumstances,” Mr Shah says.

African Cotton Industries has, however, dismissed Nakumatt’s claim, arguing that the retail chain’s troubles started months before the law capping interest rates was passed.

The consumer goods manufacturer says it has since May last year tried to negotiate a settlement of the Sh70 million debt with Nakumatt but has not succeeded.

Nakumatt is also accused of repeatedly failing to honour promises to pay its debts, leaving liquidation as the only viable option.

“Since May 2016, we have had extensive discussions with Nakumatt seeking normalisation of the overdue account, which you had indicated would be improved by July 2016,” African Cotton Industries says in court papers, adding that all promises have failed to materialise.

“To our great dismay, 12 cheques amounting to the sum of Sh11.7 million were dishounoured upon presentation in March 2017,” the supplier says in a statutory demand to Nakumatt and Mr Shah.

The insolvency suit and the tiff with TRM come at a time when the retail chain is desperately seeking a deal with its lenders and suppliers who are keen on a quick solution to Nakumatt’s heavy debt load.

Trade Principal Secretary Chris Kiptoo last week stepped in to help it broker a deal with creditors in government-aided negotiations.

Mr Kiptoo said Nakumatt’s failure to attract a deep-pocketed investor by March has left its owners with two tough options - to liquidate the business or significantly restructure its operations to keep it afloat.

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