Tuskys wants assets held by landlords in 20 outlets released

Fallen retail giant Tuskys Supermarket wants the court to compel its landlords to release its non-core assets currently held in about 20 branches over rent default for sale as part of its turnaround plan.

In an application before the High Court, the retailer said the sale of pre-selected non-core assets in outlets that it intends to exit through surrender of leases granted to the premises will help it resume operations as a going concern and ultimately enable it to meet its financial obligations to its creditors.

The retailer is hoping to net Sh911.5 million from the sale of its non-core assets. Through lawyer Patrick Onyango Ogola, the retailer says the sale of the items will also allow it to restock its other outlets and settle unsecured creditors’ debts.

Some of the outlets where landlords have obtained orders to seize the retailer’s assets over rent default include Nanyuki Mall, Eldocenter, Shiloa, Mtwapa Mall, Mega Mall, Pioneer and Karen CrossRoads.

Others are Lolwe in Kisumu, Ananas in Thika, Buru Buru, Juja City Mall, Chigware, Milele, Kitengela, Adams, Malindi, Northview, Uthiru and Mirema. The retailer wants the court to okay the sale of non-core assets at the said branches.

“The Applicant has already identified potential purchasers of the aforementioned non-core assets, which purchasers similarly operate and run supermarkets under various names and styles. These intended purchasers shall, in addition to purchasing the Applicant’s non-core assets, take over the Applicant’s premises as new tenants in the said outlets,” said Mr Ogola said.

Tuskys says it plans to take advantage from the spike in sales attached to the upcoming holiday season. The company has also procured the consent of Diamond Trust Bank (DTB) which holds a security interest over the assets earmarked for sale. But the continued closure of the outlets by landlords where the retailer plans to exit and whose non-core assets have been reserved for sale have hampered its plans to raise cash.

“On this premise, the Applicant continues to accrue rental and utility arrears on the premises and the assets continue to remain at risk of dissipation and predatory creditor actions,” said Mr Ogola.

In a race to prevent collapse, Tuskys is seeking to sell a majority stake to a consortium made up of a private equity firm and an undisclosed foreign retailer.

The struggling retailer has delayed in raising Sh2 billion short-term debt from an unnamed private equity firm based in Mauritius, with the funds aimed at stabilising operations to make it more attractive to strategic investors it is courting.

Raising new capital will ease the retailer’s financial pressure, giving it more time to negotiate the sale of a majority stake in a transaction that could delay by six months or more.

Tuskys earlier estimated it needed at least Sh2 billion to survive in the short-term as piling debt led to supplier defections, stock-outs and closure of some stores.

In October, the High Court judge Francis Tuiyott barred the supermarket’s creditors and auctioneers from attaching some of its assets, pending the determination of a case it has filed.

A number of creditors have sued the supermarket, seeking to wind it up for failing to settle its debt.

Among the creditors who moved to court are home appliances and electronic dealer have Hotpoint, which is seeking Sh248 million from Tuskys.

Court documents showed that Hotpoint supplied Tuskys with refrigerators, water dispensers, cookers, coolers, microwaves and TVs.

Security company, Syndicate Agencies also sought to wind-up Tuskys over a debt of Sh30 million.

The retailer, which at its peak operated 63 branches started shrinking as siblings, who took over ownership after the death of the chain’s founder Joram Kamau in 2002, fell out.