Uchumi secures Sh500 million loan to pay suppliers as it shops for CEO

Uchumi Supermarkets Board chairperson Ms. Khadija Mire addressing the press, with him is Board member Samuel Kimani. [PHOTO: JENIPHER WACHIE/STANDARD]

Suppliers of cash-strapped Uchumi Supermarket will have to wait for up to three months for their money. The firm, which is Kenya’s only publicly listed retailer, has obtained Sh500 million loan from commercial banks and will also sell assets worth Sh2 billion to settle the debts in the next three months.

Board Chairperson Khadija Mire, told close to 100 suppliers who attended the meeting yesterday, that the retail chain had finalised arrangements to pay 50 per cent of debts within the next two weeks and the rest in three months.

“We have obtained Sh500 million funding from our bankers, which is available to pay part of the debt as we finalise the disposal of non-core assets worth over Sh2 billion to pay the remainder of the debt within 90 days,” said Ms Mire. But the company did not disclose the specific properties lined up for sale.

The retail chain said the current debt will continue to be paid in line with the existing credit agreements. Trouble at the firm’s shore has returned just five years after it was lifted from receivership.

Yesterday, the firm made true its promise and advertised for the position of Chief Executive Officer and Chief Finance Officer.

This is a week after firing its turnaround CEO Jonathan Ciano and CFO Chadwick Omondi over ‘gross misconduct and gross negligence’.

Mr Ciano helped turn around the retailer from an insolvent entity after it chalked up losses and failed to pay suppliers in 2006. Since its turnaround, Uchumi has only paid dividends once out of the results of 2014, largely because it does not have the money. Supplies have been cut and for the critical ones, the management has had to beg for time and has even renegotiated payment terms.

Part of the trouble started after senior managers began supplying most goods sold in the dozens of outlets owned by Uchumi. It started with a trickle, but with time, the trend got so ingrained, leaving Ciano helpless. With senior managers doubling up as suppliers, it became difficult to separate business interest and self-interest.

The board also suspended the supermarket chain Human Resources Manager Michael Kibe pending investigation of irregularities. The supermarket is now turning to a consultant to review its business model and its ongoing expansion in a move that could see more staff sacked.

The meeting came days after the suppliers started boycotting the supermarket demanding for settlement of their debts estimated to be running into Sh1 billion. “We have asked management to sit with each supplier individually and agree details of the repayment plan and sign a commitment to ensure that this problem is fully behind us,” said Ms Mire.

But should suppliers refuse to warm up to this call, then customers should expect emptier shelves in coming months before the retailer secures the money to repay them. The supermarket has also launched an audit to determine how money raised via last year’s Sh900 million rights issue and other cash was spent.

Fresh cash injection

In the same year it floated the rights issue, the retailer still took a Sh405 million loan from the Co-operative Bank to pay suppliers and a Sh600 million loan from KCB to fund expansion.

Uchumi’s second threat of collapse comes at a time when several companies among them Kenya Airways and Mumias Sugar Company have turned on to the taxpayer for fresh cash injection to remain afloat.

Mumias, which is tinkering on the brink of collapse is anxiously waiting for the government to write it a Sh1 billion cheque to remain afloat. On its part, Kenya Airways recently received a Sh4.2 billion loan to help it meet its running costs after it took a beating from the sluggish tourism industry bleeding from terror attacks.

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