Cash-strapped Tuskys Supermarket will lose its first real estate asset through a public auction over a Sh650 million Equity Bank #ticker:EQTY debt, dimming chances of a revival for the once giant retailer.
The five-storey commercial building, which houses the retailer’s largest store and sits at the junction of Tom Mboya Road and Accra Road in Nairobi, will be sold when the auctioneer’s hammer falls on March 2.
This is the first major auction of properties linked to Tusker Mattresses Limited, the owner of the Tuskys brand, which has so far only lost merchandise to auctioneers for rent default.
The move to auction the building is the latest signal of the retailer’s continuing financial distress and could trigger multiple creditors to seize and forcibly sell its assets estimated at Sh6.67 billion.
Insiders at the Antique Auctions, which is driving the sale of the city centre property, linked the auction to an alleged Sh650 million loan that the supermarket operator owes Equity Bank.
“We are selling the building where Tuskys currently operates along Tom Mboya Street in Nairobi on public auction and the asking price is Sh650 million,” a representative of Antique Auctions said on Monday.
“They took a bank loan from Equity Bank that dates back to 2014 and they defaulted on payment.”
The sale of the property will also likely see the Tuskys Imara supermarket closed unless the new owner chooses to retain the retailer as a tenant.
A deposit of 25 percent of the total amount must be paid at the fall of the hammer or immediately after the acceptance of the bid in cash or a banker’s cheque and balance paid in 90 days to Equity Bank.
In a race to prevent collapse, Tuskys has been seeking to sell a majority stake to a consortium made up of an undisclosed private equity firm.
The proposed transaction is, however, yet to be concluded and Tuskys has kept details on the deal secret.
High Court judge Francis Tuiyot gave the retailer 30 days from November 26 to reveal details of a restructuring plan that includes tapping a strategic investor for Sh2.1 billion and sale of Tuskys’ assets worth Sh911 million.
The judge said failure to make disclosures would likely trigger a hearing of a liquidation suit, which could see the retailer wound up to allow creditors recoup their debt after an unsuccessful rescue attempt.
Tuskys has hinged its recovery on the assets sale, the Sh2.1 billion and restructuring of its debts to ensure staggered payment to creditors owed nearly Sh20 billion.
But the retailer has rejected the creditors’ petition in court to reveal the identity of the fund based in the Cayman Islands tax-haven amid doubts over the existence of the deal.
Since announcing the Sh2.1 billion deal last year, the retailer has been losing employees, stores, customers and suppliers as its cash troubles worsen.
The retailer disclosed in court papers that its assets can only cover payments of Sh6.67 billion of the debts or 34 percent of the dues owed to unsecured creditors.
This indicates that Tuskys owes the unsecured creditors a total of Sh19.6 billion, which is nearly 10 times the Sh2.1 billion the retailer is seeking from a strategic investor for its revival.
Tuskys has opposed its liquidation by scores of firms, arguing that its assets are inadequate to settle a majority of the creditors’ dues.
Tuskys, until recently Kenya’s top retailer with 53 stores, has less than seven outlets operating amid stock-outs. At its peak, the retailer was an acquisition target for global giants seeking a foothold in East Africa such as Walmart.
Poor management, rapid expansion and a vicious fight among family members that own Tuskys hurt the retailer, opening the door for foreign chains such as France’s Carrefour and local rival Naivas to gain market share.
It has been forced out of scores of premises across the country after defaulting on rent.
The debt-ridden supermarkets chain initially blamed its troubles on the outbreak of the Covid-19 pandemic.
Another once top retailer, Nakumatt, collapsed in a similar fashion.
Nakumatt, which grew from a mattress shop in Nakuru to have branches across East Africa, was forced to shut down in 2020 as it struggled to repay its suppliers, landlords and other creditors.