Uchumi meets creditors in bid to forestall closure

Uchumi Supermarkets has called for crunch meetings with creditors and suppliers in an attempt to forestall court cases that are petitioning for its closure.

The retail chain says it wants to avoid a lengthy court process, initiated by seven of its suppliers seeking to declare them insolvent over a part of their debt, that has thrown a spanner into their plans for revival.

In a meeting held Tuesday at the office of International Trade principal secretary Chris Kiptoo, Uchumi’s management and a section of the retail chain’s creditors resolved to meet seven suppliers who have filed for winding up the business in a bid to reach a consensus to withdraw the petition.

“I know we will succeed, I have talked to the seven suppliers to make them understand the path they have taken will not be good for anyone,” Uchumi boss Julius Kingetich said. Uchumi owes suppliers Sh3.6 billion, with another Sh2.5 billion debt owed to banks against a total asset base of Sh6.1 billion — which puts it in a negative net assets position.

The litigants, imports and supply firm Ceccagnoli Italiano Ltd, Kenblest Group, Githunguri Dairy, Kappa Oil, Insync, Star Times and Nairobi Bottlers are owed just over Sh300 million by Uchumi.

The retailer has convinced some suppliers to convert part of the debt to equity.

The troubled supermarket met some suppliers last week who agreed to oppose the winding up petition.

Association of Kenya Suppliers chairman Kimani Rugendo told the Business Daily that two of the companies that have filed the suit had agreed to pull out in principle, without revealing their identity.

READ: Uchumi suppliers in talks to convert debt into ownership

The suit is a do or die for one of Kenya’s oldest retailers which is currently under a cash crisis after some of the lenders who were willing to finance its revival grew cold feet.

Lang’ata Supermarket is partly charged to United Bank for Africa (UBA) under a Sh250 million short-term facility to pay suppliers. The bank said it was willing to offer more support if the winding up suit is dealt with.

The Kenya Commercial Bank (KCB), which holds the charge to Ngong Hyper Supermarket that Uchumi has already sold at Sh1.4 billion, is unwilling to allow proceeds of its sale to reach the retailer.

“We need to talk to KCB, money from Ngong Hyper has began to flow and no other bank is willing to give us money because of the petition,” said Mr Kingetich. KCB, which is owed Sh900 million, is holding onto Sh400 million from the Ngong’ Hyper sale.

The Industrial and Commercial Development Corporation (ICDC), which is an Uchumi shareholder, has indicated that it will not exercise the option of recovering its debt without first offering help as part-owner.

Uchumi also wants support from the government in terms of a bridging loan structured like the Sh678 million offered when the retailer was placed under receivership a decade ago.

The government, in the biggest show of commitment, stated through Dr Kiptoo that it needed re-assurance of the retailer’s resuscitation plan before committing funds.

“When I was preparing a memo quoting a figure we needed to know what the other shareholders were doing because as government we have only a 15 per cent stake, and all the measures will result in dilution,” said Mr Kiptoo.

The PS said that Treasury Cabinet Secretary Henry Rotich had already signed a cabinet memo to discuss the possibility of a bailout subject to a concrete proposal from shareholders.

“The CS Treasury has already signed the memo which means they have allocated money in the ledgers, but we needed to consult so that when asked questions we can present something solid,” said Mr Kiptoo.

Industrialisation CS Aden Mohamed had earlier indicated that Uchumi would first have to look at their assets, then come to shareholders where the government will play its role as a shareholder before considering what else to do.

Uchumi said that with the sale of assets, a debt swap, closure of lossmaking branches and staff layoffs it is set for a comeback.