Companies

Tuskys given 45 days to reach Sh2bn debt deal

tuskys

Employees of Tuskys branches in Kisii protest termination of their contracts and three months' unpaid salary on September 30, 2020. PHOTO | RUTH MBULA | NMG

Summary

  • Justice Phillip Tuiyot Wednesday heard that the cash will be used to turn around the troubled business and payment of all creditors both secured and unsecured.
  • He allowed a request by the retailer’s lawyer Ecrone Omulloh to suspend the liquidation proceedings for 45 days to allow finalisation of the debt injection.
  • Majority of Tuskys shareholders approved the raising of the debt from an offshore fund and loan will be secured by retailer’s shares.

The High Court in Nairobi has frozen liquidation proceedings against Tuskys for 45 days to allow the retailer complete a Sh2.1 billion debt deal that will allow payment of suppliers.

Justice Phillip Tuiyot Wednesday heard that the cash will be used to turn around the troubled business and payment of all creditors both secured and unsecured.

He allowed a request by the retailer’s lawyer Ecrone Omulloh to suspend the liquidation proceedings for 45 days to allow finalisation of the debt injection.

Majority of Tuskys shareholders approved the raising of the debt from an offshore fund and loan will be secured by retailer’s shares.

“The 45 days will be to finalise the debt injection. Everything is approved, only documentation that is remaining. During the period we will make reasonable payment proposals to all the creditors,” said Mr Omulloh.

He had appeared in court for hearing of an insolvency petition lodged by home appliances and electronics dealer Hotpoint over a Sh248 million debt.

Hotpoint sought liquidation of the retailer after failing to pay debts.

The electronics dealer indicated that the debt had stood at Sh259.9 million in May, this year and after a statutory demand, Tuskys trimmed it by only Sh11.7 million.

Last week on Tuesday, another creditor Rentco East Africa joined the case and obtained injunction orders stopping auction of Tuskys equipment in premises occupied by the retailer. This was based on the argument that the equipment belong to Rentco and are only leased to Tuskys. This was after a string of auctioneers started going after the retailer’s stock in order to recover debts running into billions of shillings.

The scheduled hearing proceedings turned to be a mention following the information availed by Mr Omulloh to the effect that the debt was being processed.

“Shareholders held the meeting and the proposal was approved unanimously,” said Mr Omulloh.

The parties will return to court on November 17 to update the judge on the progress and for further directions.

For months now, shoppers have complained of missing essential goods on the retailer’s shelves, suggesting that some suppliers are severing ties with the company amid a cash crunch.

The retailers is also locked in battle with auctioneers over defaulted rent, underlining the depth of cash flow woes at Kenya’s once leading supermarket.

Tuskys owes suppliers more than Sh7 billion.It is currently being watched by the Buyer Power Department of the Competition Authority of Kenya (CAK) after it defaulted on supplier payments.