Uchumi borrows Sh500m to pay suppliers, Sh2bn asset sales eyed

Uchumi Supermarkets chairperson Khadija Mire and the general manager for operations, who is also the incoming acting CEO, Mr Owino Ayodo, at a press conference on June 15, 2015. Ms Mire has said the firm has secured a Sh500mn loan and will clear debt owed to suppliers within 90 days. PHOTO | DIANA NGILA |  NATION MEDIA GROUP

In Summary

• A number of suppliers had stopped giving the retailer some goods in protest. The board chairperson pleaded with them to resume normal supplies to Uchumi.
• The Uchumi board chair also confirmed that the firm had advertised top key positions in the company as it seeks yet another new beginning.
• “We are borrowing Sh500 million to clear the dues,” said Dr Ciano, whose term was ended abruptly alongside the firm’s Chief Finance Officer Chadwick Okumu.

By EDWIN OKOTH
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Uchumi Supermarkets chair Khadija Mire has said the firm has secured a Sh500mn loan and will clear debt owed to suppliers within 90 days.

The board  has promised to settle all debt owed to its suppliers which have taken more than 90 days .

The board chairperson said  the retail chain had finalised arrangements to clear the arrears in three months after acquiring credit to enable it clear the arrears.

“We have obtained Sh500 million funding from our bankers which is available to pay part of the debt as we finalise the disposal of non-core assets worth over Sh2 billion to pay the remainder of the debt over 90 days old,” said Ms Mire.

The cash trapped retailer will now sit with each supplier individually and agree details of the repayment plan including a signed commitment.

Current debts will continue to be paid in line with the existing credit agreements.

The Uchumi board chair also confirmed that the firm had advertised top key positions in the company as it seeks yet another new beginning.

“Today we advertised the position of the CEO and CFO among other key positions in a bid to begin the rebuilding process. Over the next few weeks we shall be engaging a consultant to   review our business model as well as our ongoing expansion to enable us to have the right strategy, processes and people in place to drive the business,” she added. 

STOPPED SUPPLIES

A number of suppliers had stopped giving the retailer their goods in protest, however the board chairperson pleaded with them to resume normal supplies to Uchumi.

Suppliers expressed concerns over the manner in which the retail chain has been handling them and asked the board to make good its promises on repayment for both current and old debts.

Last week, former Uchumi Chief Executive Officer Jonathan Ciano said the retailer’s board of directors had approved a decision to borrow money to pay suppliers.

“We are borrowing Sh500 million to clear the dues,” said Dr Ciano, whose term was ended abruptly alongside the firm’s Chief Finance Officer Chadwick Okumu.

Heavily indebted and unable to pay its suppliers, the supermarket was put under receivership between July 2006 and March 2010.

Human Resources Manager Michael Kibewas also suspended. The highly competitive retail sector, delay in payments to suppliers and debt have put the supermarket in a fix even as it tries to remain afloat and expand in East Africa.

Concerned suppliers and other creditors have since begun demanding tough repayment terms further straining the retailer’s cash flow. This forced the supermarket to borrow Sh405 million from Co-operative Bank in September 2014 to pay its suppliers.

The board said it has kicked off a forensic audit to establish the extent of its cash-flow problem even as it prepares to sell more than Sh2 billion worth of non-core assets and use the funds to pay suppliers.