Retail giant folds as creditors make final close of Nakumatt

Nakumatt's goods strewn all over the street outside the mall premises in Nyali on March 7, 2018. PHOTO | KEVIN ODIT | NMG 

By BONFACE OTIENO
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Summary

• Peter Kahi, the court-appointed administrator of troubled retail chain, says the creditors’ only meeting set for on January 7 will formally end the Nakumatt brands should the creditors support the liquidation plan.
• The six branches, which were sold to Naivas, were expected to help the retail chain as it went back to the drawing board to rewrite the wrongs, pick up the pieces and bounce back having learnt from its mistakes. But, it appears, this dream cannot work.
• The company had sought protection using Kenya’s newly enacted company laws, which provide a pathway for distressed firms to avoid complete collapse.

Nakumatt creditors will on Tuesday vote to dissolve the once giant retailer after effort to revive the supermarket chain failed.

Peter Kahi, the court-appointed administrator of troubled retail chain, says the creditors’ only meeting set for on January 7 will formally end the Nakumatt brands should the creditors support the liquidation plan.

The creditors including banks, suppliers and landlords are owed Sh38 billion and the administrator will share about Sh422 million received from sale of six Nakumatt branches to Naivas.

“With the sale of assets to Naivas Ltd having been concluded, the administrator distributes and appropriate funds of the company to the various classes of creditors in line with IA 2015, after meeting costs of the administration,” says Mr Kahi of the Sh422 million.

The six branches were expected to help the retail chain as it went back to the drawing board to rewrite the wrongs, pick up the pieces and bounce back having learnt from its mistakes. But, it appears, this dream cannot work.

“An attempted turnaround of the business would be very costly and the company is likely to be lossmaking for the better part of the turnaround window, implying that such a turnaround would need to be financed by additional debt to sustain operations before achieving breakeven,” says the notice.

“The company also has no assets to collateralise such additional funding. The administrator is of the view that it is likely to be difficult to attract an investor to inject the substantial amount of equity required to restructure NHL’s balance sheet due to the current high degree of financial leverage.”

Creditors owed less than Sh100,000 and those that have failed to show proof of their debt will not be allowed to vote.

Nakumatt went into voluntary supervision in early 2018 after seeking protection from its creditors.

Nakumatt, which grew from a mattress shop in Nakuru to have branches across Kenya and East Africa, was forced to shut dozens of outlets from 2017 as it struggled to repay its suppliers, landlords and other creditors.

By February 2017, it had 60 branches that dropped to six in September 2018.

Its sales dropped Sh1.9 billion in the year to February down from Sh51.9 billion in a similar period in 2017.

The company sought protection using Kenya’s newly enacted company laws, which provide a pathway for distressed firms to avoid complete collapse.

Naivas paid Sh422 million for Nakumatt’s remaining assets, outbidding rivals Chandarana who offered Sh246 million for the six stores while Tuskys bid Sh70 million for three branches.