KENYA – Kenyan retailer, Uchumi Supermarkets, has reached into an agreement with its suppliers to forfeit US$25 million (Ksh2.5bn) in arrears as part of a proposed recovery plan for the retailer.
The agreement will however, see Uchumi pay US$11 million (Ksh1.1bn) of its liabilities as the deal represents 70 percent of the total US$36 million (Ksh3.6bn) owed to the suppliers for goods supplied.
According to a Citizen report, the suppliers will be paid 30 percent of the accruing debt, 40 percent of the debt will be converted to equity through preferential shares while 30 percent will be discounted debt.
“This is a positive development for the company. It will however be an ongoing stakeholder engagement at both the company and shareholder level,” said Mohammed Mohammed, chief executive officer of Uchumi Supermarkets.
This is part of Uchumi’s self-initiated Company Voluntary Agreement (CVA) that sought to serve as a debt redemption strategy.
Uchumi will now work to put in place an immediate arrangement for the clearance of the outstanding 30 percent debt owed to suppliers pegged at an approximate US$11 million (Ksh1.1bn).
Kimani Rugendo, an executive at Uchumi, said that the agreement presents an opportunity of bringing operations of the retail chain back to life.
“We will now work together to see a resumption of business,” Mr Kimani said.
The decision by the suppliers grants Uchumi a continued supply of goods even as the existing board seeks a complete turnaround for the cash strapped firm.
“Today was a vote of hope for the future. A vote for this brand is a vote for Kenyan manufacturers,” added John Karani, Chairman, Uchumi Supermarkets.
According to the Nairobi Stock Exchange listed firm, the total liquidation of the company would have resulted in a total loss for both the creditors and shareholders as the sale of existing assets would not top existing debt obligations.
In April this year, Uchumi also unveiled plans of franchising more of its branches across the country as part of its strategy enabling the retailer recover its balance sheet and grow its business.
The retailer has in the recent past been struggling financially forcing it to scale down operations and has closed down two branches within a three months period as it grapples with heavy debt and stock outs.
The retailer says it currently has six stores operating across the country from a total of 37 stores operates in East African region in 2015.