Uganda High Court postpones Uchumi’s bankruptcy petition

Uchumi Garden City, one of the outlets closed in Uganda. PHOTO | FILE 

By BD CORRESPONDENT in Kampala

In Summary

• Uchumi ceased operations in Uganda and Tanzania last year and later filed a bankruptcy petition seeking to wind up the subsidiaries to safeguard its remaining assets from creditors.

The hearing of Uchumi’s bankruptcy petition filed at Uganda’s High Court has flopped following a request by edible oil manufacturer Bidco to be given time to reply to the application.

Bidco, which is one of the companies demanding millions of Uganda shillings from the retailer, was given up to April 14 by the presiding Judge Lydia Mugambe to file their reply.

Uchumi owes more than a dozen Ugandan creditors including Crown Bottlers, Century Bottling, Nateete Shopping Centre, Samona Products, Dembe Trading, landlords and hundreds of employees who were rendered jobless by the closure of the retail chain.

Uchumi ceased operations in Uganda and Tanzania last year and later filed a bankruptcy petition seeking to wind up the subsidiaries to safeguard its remaining assets from creditors.

In an affidavit filed in court, Uchumi’s secretary John Wambugu said the firm has had working capital constraints that have resulted in delayed payments to suppliers. As of July 31, 2015, the supermarket had outstanding payables amounting to $2.62 million (Sh266 million).

The High Court invited all interested creditors to reply to Uchumi’s petition within 15 days from December 10, 2015 the date they were notified through a court directive.

Uchumi’s operations are projected to have a negative cash position of $7.1 million (Sh721 million) by end of December 2015, widening from $3.78 million (Sh384 million) in September the same year.

READ: Uchumi Uganda files for bankruptcy

Documents filed in court show that the company had incurred a net loss of $3 million (Sh305 million) as of June 30, 2014. Between January and June 2015, losses registered at $87,713 (Sh8.9 million).

The firm opened shop in Uganda with a nominal capital of $1.6 million (Sh162 million) in May 2001 with the main branch at Garden City.

Other branches were opened in the city suburbs of Kabalagala and Nateete, as well as Mbale and Gulu towns. A move to expand to Mbarara failed due to the losses the operations of the Uganda subsidiary was making.

If the petition succeeds, Uchumi’s assets will be placed in custody of the Attorney General as the official receiver.

In June 2014, the company’s assets were about $78.8 million (Sh8 billion), with shareholder equity of approximately $38.4 million (Sh3.9 billion).

Uchumi Supermarkets’ total liabilities have surpassed its assets by nearly Sh200 million, putting the firm in a negative equity position.

It remains to be seen what impact the debt settlement in Uganda will have on the Kenya-based retailer whose group financial position has worsened with a dip into negative equity.