KENYA – Kenyan retailer, Uchumi supermarket has been given a green light by the High Court to implement its Company Voluntary Arrangement (CVA) aimed to ensure its recovery by offsetting its debt.
Justice Mary Kasango allowed implementation of the CVA on condition that Uchumi pays its Sh4.7 billion (US$4.4m) debts to over 100 suppliers within six months, and in turn, all money claims currently before court be suspended, reports Daily Nation.
“In the event the company defaults…. A person may take steps to enforce a security over the company’s property only with the consent of the supervisor or with the approval of this Honourable Court; A person may take steps to repossess goods in the company’s possession under a credit purchase transaction only with the consent of the supervisor or with the approval of this Honourable Court…”
“…The company’s landlords may exercise a right of forfeiture by peaceable re-entry in relation to premises let to the company only with consent of the Supervisor or with the approval of this Honourable court,” the court papers read.
Should Uchumi fail to pay up within the six-month window, it could face death as eviction and repossession of stock will leave the retailer as a shell.
The CVA was adopted at the creditors’ meeting on March 2.
“The decision gives us a chance to implement our recovery plan. We are also aware of the challenges in the retail sector that has worsened by the Covid-19 pandemic but management is engaging with all stakeholders with a view to supporting the industry,” Uchumi Supermarkets Plc CEO Mohamed Mohamed said in a statement.
He said the retailer continues to search for strategic partners and other potential investors.
According to reports by The Star, the CVA will be subject to a periodic review through a creditors’ meeting every six months when creditors and other stakeholders will appraise implementation of the CVA and the financial well-being of the retailer.
Under the CVA, Uchumi’s creditors will have to take a 70 per cent loss on amounts owed to them, and the retailer will be expected to put up a committee to ensure that debts are paid on time.
As part of the CVA, Uchumi will look into new business models including but not limited to implementing digital strategies, moving into the convenience store model and adopting cost leadership strategies.
Owen Koimburi, the legally appointed insolvency practitioner, will implement the CVA.
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