A branch of Uchumi Supermarkets in Nairobi. Companies that converted their loans in the chain to shares have seen the value of the shares they hold almost double. file
Top companies that converted their debt to Uchumi Supermarkets shares have seen their investments nearly double since the re-listing of the retail chain at the Nairobi bourse last year.
The suppliers, including Mumias Sugar, Brookside Dairies, New KCC, Bidco, Unga Limited, Mini Bakeries and Premier Bakeries, were offered 20 million Uchumi shares last February to cut the debt by Sh200 million.
The shares were priced at Sh10 each, meaning that these companies have seen their investments grow 192 per cent given Uchumi’s current share price of Sh19.25.
The debt swap, which saw the government become the single largest investor in Uchumi Supermarkets, was aimed at reducing the retail chain’s debt burden that had slowed its growth and delayed re-listing at the Nairobi Securities Exchange (NSE).
The retail chain temporarily closed shop in June 2006 under the weight of debt prompting a government-led recovery that saw Uchumi’s return to profit in 2008 and resume trading at the NSE last year after a five-year absence.
“These companies (creditors) had confidence in Uchumi and they are now reaping the benefit of our growth,” Jonathan Ciano, the CEO of Uchumi Supermarkets told the Business Daily in a telephone interview last week.
Mumias Sugar was offered 2.21 million shares (0.84 per cent stake) for a Sh22.1 million debt. The worth of the shares stood at Sh42.6 million on Friday. The sugar miller’s faith in the retail chain received a boost after Uchumi paid a dividend this year after a 10-year drought.
The retail chain declared a dividend of Sh0.30 per share — the first payout since 2002. Mumias earned a dividend of Sh664, 914.
The payout was boon to shareholders who have seen their share rise 185 per cent over the past year, emerging the best performing share at the NSE over the period.
Brookside Diaries stake of 0.37 per cent stake is now worth Sh16 million from Sh8.3 million at moment of the debt swap, New KCC has 0.31 per cent stake worth Sh14.7 million, Bidco has 0.31 per cent, Unga Limited and Mini Bakeries have 0.20 per cent each and Premier Bakeries owns 0.22 per cent.
Uchumi in February last year revealed that the capital markets regulator had given it the nod to offer 86 million shares to the government, suppliers and shareholders for it to convert a Sh860 million debt to equity.
Of the Sh860 million equity debt swap, the government’s share was Sh350 million, which earned it 35 million shares or 13.4 per cent stake, suppliers were owed Sh200 million (20 million shares) and shareholders’ Sh310 million.
The government loan was part of Sh875 million advanced to the retail chain in May 2006 after its near collapse and was to be repaid once the company tapped a strategic equity partner.
The government stake was on Friday valued at Sh673.7 million and it earned a dividend of Sh10.6 million.
Although the Uchumi’s sales jumped 29.7 per cent to almost Sh14 billion in the year to June, its net profit fell by a third to Sh273 million on higher costs due to the opening of new stores.
Uchumi Supermarkets targets to raise Sh1.5 billion through a rights issue set to happen in the second half of next year, pricing the offer at Sh15 a piece.
The additional funds will help it take on competitors Nakumatt, Tuskys, Ukwala and Naivas.
