Nakumatt’s creditors have rejected the supermarket’s bid to appoint an administrator to run its business until it returns to profitability arguing that liquidation is the only viable means of getting the troubled retailer out of its misery.
The creditors Tuesday told High Court judge Louis Onguto that they intend to have the insolvency petition against Nakumatt determined with urgency, going against the retailer’s Monday application to have an administrator appointed to run the business.
Kakamega-based real estate firm Holden Investments, which is leading the quest for Nakumatt’s liquidation, told Justice Onguto that the proposal to have creditors suspend for two months their demand for payment of their debt was pegged on the promise of a Sh650 million bailout from Tuskys that is neither detailed nor satisfactory.
Justice Onguto on Tuesday granted all 90 creditors in the insolvency petition four days to file responses to Nakumatt’s application for the appointment of PKF’s Peter Obondo Kahi as the retail chain’s administrator.
Nakumatt is suffocating under the weight of debt that is estimated to stand at between Sh30 billion and Sh40 billion, and has sought the help of rival Tuskys, which has expressed interest in buying a 51 per cent stake in the struggling retailer and pump in Sh650 million for operational costs as well as offer guarantees of up to Sh3 billion to suppliers.
Nakumatt’s recent meeting with creditors to draw a roadmap for settlement of their debt resulted in a stalemate after they argued that the retailer is undeserving of more time to pay their debts.
The retailer has been negotiating with creditors in the hope of getting them to stop the liquidation proceedings and allow it time to recover without much success.
Nakumatt chief executive Atul Shah consequently convened a board meeting with his sons, which elected the appointment of an administrator as the surest way out of debt trap.
“It was noted that the company’s creditors had taken a view that there has been no viable proposal made for the repayment of their debts and they are unwilling to give the company 60 days requested to make a proposal to the creditors and intended to progress with the application for liquidation/winding up,” Mr Shah told his co-directors at the meeting.
Nakumatt has proposed Mr Kahi as the administrator, arguing that liquidating the retailer will see unsecured creditors go home empty handed.
Unsecured creditors include landlords and suppliers.
“The assets of the company are not sufficient to pay all amounts owing to creditors and if the company was to be liquidated at this point in time it is likely that it would only be able to pay part of the amounts owing to secured creditors, with any payment to unsecured creditors unlikely to be provided for,” Mr Kahi says.
Should unsecured creditors go empty handed, the list of the biggest losers would include the Kenyatta family-owned Brookside Dairy which is owed Sh457 million, and one of East Africa’s largest hygiene products manufacturers—Chandaria Industries—which is claiming Sh353 million.