Rating withdrawal adds to Nakumatt funding gloom

Empty shelves at a Nakumatt store on Moi Avenue, Nairobi. PHOTO | JEFF ANGOTE | NMG 

By JAMES NGUNJIRI

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Summary

• South African global rating firm GCR said it had withdrawn the national scale rating of Nakumatt Holdings Ltd since it had not provided GCR with comprehensive and sufficient information to enable it to determine the appropriate rating.
• During the last rating review in December 2016, GCR downgraded the long-term national scale issuer rating assigned to Nakumatt to BB-(KE), with the short-term and commercial paper rating both affirmed at B(KE).

The rating of troubled retail chain Nakumatt Holdings assigned by Global Credit Ratings (GCR) has been withdrawn as it struggles under the weight of mounting debts and failure to attract capital injection.

The South African global rating firm in its latest market alert said it had withdrawn the national scale rating of Nakumatt Holdings Ltd since East Africa’s largest supermarkets chain had not provided GCR with comprehensive and sufficient information to enable it to determine the appropriate rating.

This makes it even more difficult for the unrated Nakumatt to attract debt injection.

During the last rating review in December 2016, GCR downgraded the long-term national scale issuer rating assigned to Nakumatt to BB-(KE), with the short-term and commercial paper rating both affirmed at B(KE).

The ratings were valid until this month. Both had been placed on rating watch meaning they were up for possible downgrade.

“The latter was premised on management’s expectation of a substantial capital injection by early this year, although no funds have been received to date,” GCR said.

Nakumatt was expecting a six-week phased injection of Sh7.7 billion ($75 million) from an unnamed private equity fund beginning March, but failure to secure the funding has deepened looming challenges such as widespread product stock-outs and failure to pay employees.

Nakumatt managing director Atul Shah is on record admitting that the company is going through tough times but maintained optimism that the business will turn around.

Earlier in the week, Trade principal secretary Chris Kiptoo said the retail chain supermarket management failure to attract a deep-pocketed investor by March had left its owners with two options — to liquidate the business or significantly restructure its operations to keep it afloat.

READ: Trade PS steps in to broker deal with Nakumatt creditors

The PS, however, said Nakumatt’s private ownership meant it had to independently reach an agreement with its financiers and suppliers who are owed billions, with the State merely acting as a mediator.

Nakumatt Holdings Ltd owns and operates a chain of supermarkets in Kenya, Uganda and Rwanda. In anticipation of the capital injection, the retailer decided to consolidate its businesses by closing non-performing branches and culling slow-moving stock.

This has seen some stores in Uganda shut down, a move that has not gone down well with aggrieved suppliers and landlords who have sued for non-payment of Sh515 million.

Last month, it closed two warehouses where it stores imported goods as well as furniture and electronics, located on Nairobi’s Mombasa Road.