Wainaina Wambu
Uchumi Supermarket attendants at Capital Centre, Nairobi. [David Njaaga/Standard]
An intense seven-hour meeting yesterday breathed new life into Uchumi
Supermarkets after creditors owed more than Sh5 billion voted for the ...
second time to have the retailer’s debts restructured.
Creditors including banks, suppliers and shareholders agreed on the
Company Voluntary Agreement (CVA) that will see them take a 30 per cent
haircut and get repaid in parts within six years.
Aside from the haircut, 40 per cent of the debt owed to unsecured
creditors will be converted to non-cumulative convertible preferred
shares.
The other option on the table had been liquidation of the 45-year-old
retailer, which would have seen thousands of suppliers - who make up the
list of unsecured creditors - walk home with nothing.
SEE ALSO :How death of supermarkets has ruined thousands of lives
The firm has a deficit of Sh7.6 billion if it was wound up.
Uchumi Chairman John Karani welcomed the vote of confidence, saying the
real work had now begun and that the firm could be restored to its
former glory.
“You cannot write us off yet. The Uchumi story continues unfolding with
the confidence that has been expressed here today by those who stand to
lose most,” he said.
“All we have here is a new lease of life to bring Uchumi back on its feet and we know we can do it.”
The retailer’s fortunes have fallen sharply in recent years, with its
share selling at Sh0.28 yesterday at the Nairobi Securities Exchange. It
once boasted 1,500 direct jobs but now only has 200 staff.
Business model
The firm is currently operating seven branches countrywide - Aga Khan
Walk, Adams, Jogoo Road, Meru, Eldoret, Nairobi West and Lang’ata.
Dubbed project Mara, the CVA will now be taken to the High Court for
registration by Owen Koimburi, the Uchumi independent supervisor, so
that it can start being implemented.
The troubled retailer is seeking to dispose some of its land and hopes
the CVA will help attract a strategic investor to inject capital and
turn it around. It also seeks to optimise performance through a new
business model.
Out of the four banks - secured creditors - who were present at the
vote, three voted for the CVA. Uchumi CEO Mohamed Mohamed said he could
not disclose their names until the CVA was registered.
One of the secured creditors had rejected the CVA last year, prompting
the second vote. However, Mr Koimburi said the latest vote will bind all
the creditors once adopted.
Uchumi hopes to earn Sh2.8 billion from the sale of a piece of land in
Kasarani, which is however also claimed by Kenya Defence Forces.
Mr Mohamed said the matter was currently at the Attorney General’s
office and the renewed CVA agreement would see the issue fast tracked.
“The disposal of that asset is not sufficient to clear all the debts
that we have, that’s why we went into this CVA to agree on how the debt
can be restructured,” he said.
“As the business improves we can always look into how that balance can be changed.”
Some of the secured creditors that will receive a lump sum payment in
the CVA include UBA (Sh10 million) and Co-operative Bank (Sh16.3
million).
KCB is set to receive a full and final settlement of Sh900 million under the CVA.
ICDC’s debt will be restructured for seven years, 95 per cent of UBA for
seven years, and 54 per cent of Co-op Bank lease for five years of the
total outstanding balance paid on a quarterly basis.
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