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PKF books Sh35m fees from troubled Deacons

Muchiri Wahome
Deacons CEO Muchiri Wahome. FILE PHOTO | NMG 

Consultancy firm PKF Kenya is set to earn up to Sh35 million in fees for its work as the administrator of the insolvent fashion retailer Deacons East Africa #ticker:DCON.

The advisory firm will earn Sh20 million this year and the rest will be payable in subsequent years, according to initial estimates disclosed to creditors of Deacons.

“The administrators have already been engaged by the directors for a fee of Sh20 million (subject to VAT). The fee will be recovered from the company’s cash flows and in priority in the event of liquidation,” PKF said in a report to the creditors.

“A further success fee of 2.5 per cent of gross realisations capped at Sh15 million (subject to VAT) has been negotiated.”

Corporate events that could trigger the additional compensation include sale of the company or part of its assets, new loans raised and injection of new equity capital.

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Besides the professional fees, administrators Peter Kahi and Atul Shah are to be reimbursed for expenses incurred in their work such as taxi and printing costs. PKF’s report has revealed Deacons’ asset-light business model that has left creditors staring at losses following the collapse of cash flows and earnings.

“This statement of affairs indicates that in the event of a liquidation (forced sale basis) the creditors are likely to lose 95 per cent of their debt with unsecured creditors likely to lose 100 per cent of their debt,” the report says.

Deacons made a loss of Sh558 million in the 11 months through November and no prospective buyer has expressed interest in the company, the administrators said.

Its collapse was precipitated by loss of key franchises like Woolworths and Mr Price besides a heavy debt load and increased competition.

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