KENYA – The High Court of Kenya, Commercial and Tax Division has extended the period of amending Uchumi Supermarkets Plc’s Company Voluntary Agreement, its recovery plan to return to normalcy by 30 days so as to give the retailer additional time to involve all interested parties.
Creditors and shareholders of the Nairobi Stock Exchange listed firm approved the CVA in May this year in bid to revive Kenya’s oldest retail chain.
The retailer sought the services of financial advisory firm-InVhestia Africa Ltd to help resolves its financial woes, which saw the development of a CVA to help restructure its debt and business optimization.
Uchumi was owing its creditors and suppliers over Sh3.9 billion (US$36 million) which is way above its assets Sh1.4billion (US$13m) as at June 30 2018, meaning even if its assets are all sold, it will not be able to clear its debt.
The plan comes after the retailer saw its creditors forfeit Sh2.5 billion (US$24m) debt owed to them as part of the proposed recovery plan.
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.
As part of the CVA the retailer will leverage on technology, pursue beneficial partnerships and review its business model while managing its costs.
The struggling retailer will also begin franchising select stores and embark on a digital transition to move into a more convenient store model.
Troubled retailer Uchumi Supermarkets is now counting on a Company Voluntary Arrangement (CVA) to bounce back to profitability after half a decade of poor performance amid liquidation traps. They are projecting to make a net profit of Sh61.5 million (US$592,377) as at June 30,2020.
Owen Koimburi appointed as the retailer’s supervisor as per the Insolvency ACT 2015 will oversee the implementation of the CVA.
Uchumi’s financial woes
Uchumi’s financial woes have seen it close more than 25 branches in the last three years, including shutting down its operations in Tanzania and Uganda in October 2015. It had a network of over 40 branches in Kenya, Uganda and Tanzania.
Its biggest blow included the closure of the Sarit Centre ‘Hyper’ branch in Westlands, which it shut in February last year after operating for 30 years.
Currently, the retailer is operating six franchised branches with an annual income of about Sh310 million and four fully fledged Uchumi branches.
The retailer has been making losses for more than four years now with the latest being the Sh895 million (US$8.6m) after-tax loss for the year ended December 2017, which nearly doubled from Sh547 million (US$5.2m) recorded during a similar period the previous year.
Efforts by the government to inject capital to support its recovery has bore little fruits. The last capital injection was worth Sh1.8 billion (US$18m) which was to be released in tranches.