KENYA – Uchumi Supermarkets has opened talks with its suppliers in a bid to have the creditors convert the debts owed to them by the retailer into shares.
The creditors on Tuesday agreed to oppose an ongoing insolvency case against Uchumi filed by five suppliers.
The supermarket hopes the conversion will ease the debt load on its books.
“We have agreed to have the debt restructured as we are opposed to winding up. We have given a mandate to our lawyers to append our names in opposing the (winding up) petition because everyone will be a loser. We can bring it (Uchumi) back like we did previously,” said the Association of Kenya Suppliers Chairman Kimani Rugendo.
Imports and supply firm Ceccagnoli Italiano Ltd has filed a petition to wind up Uchumi over its debt, a suit that has attracted Kenblest Group, Githunguri Dairy, Star Times and Nairobi Bottlers, which are claiming a combined Sh315 million from the retail chain.
The case is to be heard on Thursday.
Uchumi’s total liabilities have surpassed its assets by nearly Sh200 million, putting the firm in a negative equity position.
The retailer’s debt load of Sh6.3 billion against a total asset base of Sh6.1 billion has crystallised into a negative equity of Sh181.8 million, or Sh0.49 per share as per half-year financial statements to December.
Uchumi owes suppliers Sh3.6 billion with another Sh2.5 billion debt held by banks with charged assets.
The supermarket’s chief executive Julius Kipn’getich said the suppliers stand to lose most if they close Uchumi.
“The implication of hiring a liquidator is they might get nothing as a lot of the assets are charged to banks. The government will be paid first, then the employees and those with secured credit,” he said.
He said they had decided to meet the suppliers to convince them that they “had jumped the gun” and to offer them a roadmap for settling the debt.
“The government is willing to put in money, the asset sales are beginning to trickle in, so we are asking, why are you guys (suppliers) impatient when everything is picking up and putting in another roadblock,” he said.
Mr Kipn’getich said Uchumi had already sold Ngong Hyper at Sh1.4 billion and had received “interesting offers” for the Kasarani property despite it being the subject of an ongoing suit.
Mr Rugendo said he had met government officials who had indicated that Cabinet was reviewing a proposal to bail out Uchumi by up to Sh2 billion.