Capital Markets

Uchumi share deal with its suppliers to dilute owners

uchumi

Uchumi Supermarkets shareholders’ stake will be diluted by nearly 60 per cent after suppliers of the retail chain agreed to convert Sh1.8 billion debt into equity in an out-of-court settlement. PHOTO | FILE

Uchumi Supermarkets shareholders’ stake will be diluted by nearly 60 per cent after suppliers of the retail chain agreed to convert Sh1.8 billion debt into equity in an out-of-court settlement.

The debt is part of an estimated Sh3.6 billion owed to suppliers. The company has been struggling under a weight of debt that has sunk it into a negative asset position.

“According to our estimates, against yesterday’s (May 18) volume-weighted average price (VWAP) of Sh3.50, current investors could face a dilution of about 58.5 per cent,” said Standard Investment Bank (SIB).

SIB said it was still unclear as to what progress had been made towards reviving the insolvent company.

“The retailer is also seeking to have a strategic investor come in to inject additional funds. Overall, it still remains unclear as to how much progress the firm has made since scaling down in 2015,” said SIB.

Thursday the firm’s price was slightly down to an average of Sh3.45 a share from the previous day’s Sh3.50 on the Nairobi Securities Exchange.