Deacons administrators to begin search for Sh450 million in form of convertible loan to save the company.
The loan will offer some reprieve to the firm but will also mean that at some point, the new creditors can convert this loan into shares and dilute the stake of current shareholders.
About Sh50 million is to be used in supporting the working capital requirements and the balance to settle outstanding creditors and secured lenders.
Top shareholders of Deacons East Africa #ticker:DCON want administrators to begin search for Sh450 million in form of convertible loan to save the troubled fashion and clothing retailer.
In a resolution passed at an extra-ordinary general meeting in Nairobi on Tuesday, the shareholders authorised joint administrators Peter Kahi and Atul Shah to get the loan which is supposed to support working capital and pay debts.
“---the Joint administrators be and are hereby generally and unconditionally authorised to exercise the borrowing powers of the company to raise the required funds in the form of convertible loan(s) from any person(s) willing to lend or grant such funds to the Company,” read the resolution in part.
Getting a convertible loan will offer some reprieve to the firm but will also mean that at some point, the new creditors can convert this loan into shares and dilute the stake of current shareholders.
About Sh50 million is to be used in supporting the working capital requirements and the balance to settle outstanding creditors and secured lenders.
This may offer reprieve to NIC #ticker:NIC and UBA banks, which are owed Sh387.55 million and Sh152.81 million respectively. Others owed money are Kenya Revenue Authority (Sh62.34 million), and former and current staff (Sh41.6 million).
The meeting with shareholders comes after the January meeting between the joint administrators and creditors. During the January 22 meeting, creditors wanted top 20 shareholders compelled to pump in the Sh450 million.
In addition, creditors approved that administrators search for independent transaction advisors to help identify any potential buyers for the firm that sunk into administration in November last year.
The administrators hope to put up an expression of interest by end of this month and seal the transaction by close of September if any buyer comes forth.
They have cautioned that liquidation will only fetch only Sh63 million, leading to Sh1.9 billion loss to shareholders and creditors.
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