Companies

Shoprite pays Sh1.5bn Stanbic loan

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A Stanbic Bank branch on Kimathi Street, Nairobi. FILE PHOTO | NMG

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Summary

  • South African retailer Shoprite Holdings has settled a Sh1.5 billion loan it took to fund its local operations from Stanbic Bank Kenya.
  • The supermarket chain announced last year that it was exiting the Kenyan market to cut its losses, causing uncertainty for the bank which had provided the loan without taking security.
  • Shoprite said in a trading update for the six months ended December that it had repaid the loan.

South African retailer Shoprite Holdings has settled a Sh1.5 billion loan it took to fund its local operations from Stanbic Bank Kenya.

The supermarket chain announced last year that it was exiting the Kenyan market to cut its losses, causing uncertainty for the bank which had provided the loan without taking security.

Shoprite said in a trading update for the six months ended December that it had repaid the loan.

“The amount outstanding at June 28, 2020 was repaid during the period, denominated in Kenya shilling, unsecured and carried interest at an average rate of nine per cent,” the multinational said in the disclosures.

Shoprite settled the loan earlier than its maturity date of March 2022.

It entered the Kenyan market in 2018 and opened four stores before deciding to exit on the back of larger-than-expected losses, partly exacerbated by the Covid-19 pandemic.

It suffered a loss of Sh3.2 billion in the year to June 2020.

It closed the Karen branch in Nairobi last April and followed it with City Mall branch in Nyali, Mombasa which was shuttered in August.

“The group took a decision to exit the Kenya market and the two remaining … were closed at the end of February 2021,” the multinational said.

Stanbic is among the few banks that have been made whole despite lending to cash-strapped retailers.

Nakumatt Holdings went into administration in January 2018, having taken loans of more than Sh6 billion from local banks. Some of the credit facilities were unsecured.

Tuskys’ ongoing financial challenges have also inflicted pain on its bankers but the level of their exposure is yet to be quantified.

Recent debt crises in the Kenyan supermarket business have shown that the retailers operate on an asset-light business model, paying lenders, landlords, suppliers and employees from sales collections.

In good times, a major supermarket operator can be a lucrative client for a bank by bringing in large deposits, fees and interest on loans advanced.

Fallen giants

Shoprite is among the foreign retailers that had sought to fill the void left by the collapse of former supermarket giant Nakumatt Holdings.

Its exit now leaves Naivas and Carrefour, a franchise backed by Dubai-based conglomerate Majid Al Futtaim, as the strongest supermarket operators in the country.

Tuskys’s downward spiral comes amid failure to raise new capital from prospective debt and equity investors.