Deacons’ creditors struggle to find buyer for collapsed retailer

A worker at a Deacons store in Nairobi in 2009. FILE PHOTO | NMG

By ANNIE NJANJA
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Summary

• Deacons East Africa, which was suspended from trading on the Nairobi Securities Exchange, went into administration in November 2018 after it was unable to repay creditors, including banks.
• Its administrator, PKF Kenya, was subsequently authorised to implement a series of options, including selling the whole company and raising new funds from debt and equity investors.

Collapsed fashion retailer Deacons East Africa is yet to be sold more than a year after the company’s creditors approved the proposed transaction.

The company, which was suspended from trading on the Nairobi Securities Exchange, went into administration in November 2018 after it was unable to repay creditors, including banks.

Its administrator, PKF Kenya, was subsequently authorised to implement a series of options, including selling the whole company and raising new funds from debt and equity investors.

Dyer & Blair Investment Bank, the transaction adviser, is yet to get investors interested in Deacons.

Mr Peter Kahi, a partner at PKF and one of the fashion retailer’s administrators, said the process of looking “for a strategic investor or sell the assets in the event no investor comes on board” was ongoing.

Besides its heavy debt load, Deacons suffered from the termination of its major franchises and increased competition from the entry of new players in the formal fashion market.

The company’s former partners Woolworths and Mr Price of South Africa, for instance, took back their franchises and launched direct operations in Kenya.

Most of Deacons’ former store locations have been taken over by rivals.

Deacons is up to Sh1.9 billion in debt, and the administrators had earlier said that shareholders’ injection of about Sh450 million would keep the business running and help to ease its debt distress.

The retailer’s collapse has exposed various parties to significant losses. Those that risk losing their claims include NIC Bank (now trading as NCBA Group) and UBA Kenya which provided Deacons with loans of Sh387.55 million and Sh152.81 million respectively.

Other losers would be the Kenya Revenue Authority (Sh62.34 million), and former and current staff (Sh41.6 million). Deacons shareholders would also lose their issued and called up capital worth Sh857.7 million.