"Tuskys must now be put to death to stop the suffering of unsecured creditors. It must now be liquidated".
That is what High Court judge David Majanja said when he hit the last nail on the coffin of Tuskys Supermarket, the retail chain which at its prime employed up to 2,600 people across its 53 outlets in the country.
Justice Majanja says in his judgment declining last month’s application by the retailer for more time to restructure and turn around the supermarket that “no meaningful purpose will be served if it is indulged or accommodated further by the court”.
The judge appointed Kolluri Venkata Subbaraya Kamasastry as the provisional liquidator of Tusker Mattresses Ltd.
Tuskys Supermarkets started experiencing trouble in 2011 when its sibling shareholders disagreed over the direction of the retail chain.
Yusuf Mugweru accused family members of mismanagement and even attempted to wind up the retailer. For their part, three of Mugweru's siblings — John, Stephen and George— accused him of attempting a takeover through the back door.
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.
Hotpoint Appliances moved to court in 2020 to liquidate the supermarket chain over a debt of Sh248 million. Hotpoint was soon joined in the petition by Rositalia Ltd and Syndicate Agencies Ltd, all seeking to liquidate the once retail giant over Sh11.2 million and Sh30.8 million, respectively.
The number of creditors later ballooned to 42 with a cumulative debt of Sh4.5 billion. They included suppliers such as Brookside Dairy Ltd (Sh127 million), Rentco Africa (Sh500 million), LG Harris EA (Sh22 million, Jeff Hamilton (K) Sh10.5 million and Premier Foods Industries (Sh27.8 million).
All the creditors who joined the cases supported the petition to liquidate the company, stating that they supplied the retailer but had not been paid despite making demands.
In the judgment, Justice Majanja noted that the supermarket chain did not deny its indebtedness but sought more time to source funds to turn around the company.
The supermarket informed the court that it had settled the debt owed to Equity Bank and executed seven sale agreements for specific collateral charged to Diamond Trust Bank.
The court heard that Tuskys was in the last stages of agreeing to a settlement with the bank to ensure a full and final settlement of the debt and that it had devised a business strategy and turnaround plan that has been generating Sh55 million per month in the aggregate, enabling the company to keep operating as a going concern.
The retail chain said the money it was making in profits would enable it to repay the debts strategically and fund its growth and expansion plan.
Further, the owners told the court that the retailer had identified a means of raising funds, which would not be realise the target if it is liquidated.
Other modes the company said it had devised as a turnaround plan was selling non-core assets, sale of inventory, bridging working capital and trading margins.
The company pleaded with the court for a 12-month moratorium to enable it re-capitalise and regrow its operations.
Last year, Equity Bank got the nod to sell Tuskys' prime property on Tom Mboya Street in Nairobi.
But the supermarket obtained temporary orders suspending the auction, arguing that the building was worth more than what Equity was seeking.
The property, where one of the retailer’s remaining only six outlets operates, was charged to the lender to secure a loan of Sh640 million in 2014. Equity had instructed Antique Auctioneers to sell the property to recover the loan.
The supermarket had come up with a restructuring plan that included tapping a strategic investor from Mauritius for Sh2.1 billion and the sale of Tuskys’ assets worth Sh911 million.
Tuskys had 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.
The court had last December directed Tuskys to engage all the parties to resolve the matter after indicating its revival plans.
The court noted that apart from immovable assets which are charged to the bank and which are not available for the unsecured creditors, disclosed properties owned by Tuskys amount to Sh137.6 million.
