The cash-strapped supermarket has informed the High Court that it plans to sell non-core assets like furniture, fixtures and fittings in 19 branches, most of which have been shut by landlords for rent arrears.
The sale of the assets is expected to generate about Sh911 million, according to documents filed in court.
The retailer revealed the sale plan in the case where the creditors led by Hotpoint Appliances are pushing for liquidation of the supermarket over a Sh1.02 billion debt.
Tuskys has opted to sell assets in some of its branches to avoid liquidation by more than 60 creditors following delays in receiving a Sh1.6 billion debt from an undisclosed Mauritius firm.
The cash-strapped supermarket has informed the High Court that it plans to sell non-core assets like furniture, fixtures and fittings in 19 branches, most of which have been shut by landlords for rent arrears.
The sale of the assets is expected to generate about Sh911 million, according to documents filed in court.
The retailer revealed the sale plan in the case where the creditors led by Hotpoint Appliances are pushing for liquidation of the supermarket over a Sh1.02 billion debt.
Tuskys, until recently Kenya’s top retailer with 53 stores, has less than 10 outlets operating amid stockouts.
In August last year said, the retailer it had inked a deal to raise Sh2.1 billion short-term debt from an unnamed private equity firm based in Mauritius.
The funds were aimed at stabilising operations to make the retailer more attractive to strategic investors it is courting.
Raising debt capital was expected to ease the retailer’s financial pressure, giving it more time to negotiate the sale of a majority stake.
So far, Tuskys says it has received Sh500 million from the undisclosed Mauritius-based fund and has not issued timelines on when it expects to receive the remaining Sh1.6 billion.
“The sale of non-core assets has been set out in the applicant’s recovery plan as one of the sources of capital to finance the applicant’s recovery, aside from its investors’ capital injection. It is also a key aspect of the applicant’s plan to trim down its branch network,” Tuskys said.
The supermarket chain has pleaded with the court to freeze the liquidation cases for one year and allow it to continue repaying the debts, arguing that its financial position remains redeemable and its business commercially viable.
“It is also the applicant’s submission that a liquidation of the applicant in its current financial state would offer no reprieve to its creditors as it would be unlikely that the creditors would recover the totality of the debt owed to them,” said Tuskys in court
“In particular, the unsecured creditors would likely recover nothing after settlement of debts due to secured and preferential creditors.”
Kenya’s retail sector has seen two major supermarket chains collapse in recent years, while Carrefour franchisee Majid al Futtaim has entered the market and grown into the second biggest retailer in just four years.
Nakumatt, which grew from a mattress shop in Nakuru to have branches across Kenya and East Africa, was forced to shut down last year as it struggled to repay its suppliers, landlords and other creditors.
The same scene is playing out at Tuskys, which is fighting forced closure of its outlets by landlords and owes suppliers and banks in excess of Sh10 billion.
Hotpoint, which is seeking to liquidate the supermarket over a debt of Sh248 million for electronics like fridges refrigerators, cookers, and TVs, says Tuskys has not shown an acceptable plan to settle its debt.
Hotpoint also argues that the petition for liquidation should proceed, saying that no secured creditor including Tusks’ primary bankers or its financial advisers have come forward to back their revival plan.
‘’We submit that both applications are intended to unnecessarily drag out and delay the hearing of the liquidation petition and to frustrate and defeat the petitioner’s efforts of realising the amounts owed to it by the company,” said Hotpoint in its latest application.
Tuskys’ move to seek financing from a PE firm comes after the retailer exhausted its local bank credit lines.
The company struggled to repay its bank loans and approached the lenders to restructure the debt.
Details of the loan agreement captured in court, including interest rate, repayment period and whether or not it is secured, were not disclosed. The retailer also declined to reveal the identity of the fund. It was also not clear whether the debt is convertible into equity.
Tuskys’ revival will spare local banks another round of losses after the lenders and suppliers lost nearly Sh30 billion in the collapse of Nakumatt.
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