The listed retailer in its latest annual report said it borrowed the funds at an interest rate of 18 per cent and that the loan is repayable in a year, meaning Uchumi will incur Sh108 million in finance costs.
The new loan adds to another Sh300 million credit line the supermarket secured last year from the Industrial and Commercial Development Corporation (ICDC), a State-owned finance institution that has a 2.73 per cent stake in the retailer.
Uchumi already had a Sh730.5 million overdraft from KCB prior to taking the fresh loan.
“In addition to the bank overdraft from Kenya Commercial Bank, the company acquired a new loan of Sh600 million at the rate of 18 per cent to be repaid in one year,” chief executive Jonathan Ciano said in the firm’s 2014 annual report.
“The company has an existing loan from ICDC at the base rate (currently 16 per cent). The ICDC loan is to be repaid on a quarterly basis over a period of three years without a moratorium period,” said Mr Ciano.
Uchumi was banking on the cash call for funds and had shied away from taking bank loans after a Sh956 million debt owed to KCB and PTA Bank triggered its failure in 2006.
The cash call was approved by shareholders in December 2012 and its delay has seen Uchumi struggle with supplier debts and stock-outs, forcing the retailer to turn to borrowing for working capital.
Mr Ciano said the funds from KCB and ICDC have been secured using Uchumi’s two prime properties valued at Sh2.2 billion as at June.
The increased borrowings by the supermarket chain come as it prepares for a Sh895 million cash call priced at Sh9 a piece, meant to raise money to fund local and regional expansion. Its share price closed at Sh9.8 on Tuesday, 8.8 per cent higher than the rights issue price.
Uchumi’s move to chalk up more debt has seen the retailer’s finance costs grow four-fold to Sh64.6 million in the year ended June compared to Sh16.1 million the year before.
Its net profit rose 7.6 per cent to Sh384 million in the year to June, up from Sh357 million in a similar period a year before. The retailer’s rights issue opens on November 10 and existing shareholders are entitled to three new shares for every eight held.
Proceeds will be used to revamp its outlets in Kenya and to set base in upcoming malls locally and in Uganda and Tanzania where it already has outlets. Uchumi also plans to enter Rwanda by year end.
“We have adopted cautious strategic growth approach in the Eastern African region, an initiative that will be fully supported by the impending rights issue,” Uchumi said in a statement.
The delayed cash call has seen Uchumi – which was once the largest retailer in the region – drop to be Kenya’s fourth largest retailer in terms of revenue after it was overtaken by family-owned Naivas.
Uchumi has 37 stores across East Africa with a bulk of them in Kenya, six in Uganda and four in Tanzania.