Relief for Uchumi Supermarket as six suppliers agree to withdraw case

Uchumi Supermarkets CEO Julius Kipng'etich

Six of the seven suppliers that had petitioned a court to liquidate Uchumi Supermarket have agreed to withdraw the case.

In what is a significant milestone in the cash-strapped supermarket’s recovery plans, the management is now exuding confidence that they will reach an ‘amicable agreement’ with the remaining supplier by next week.

In an interview with The Standard, Uchumi Supermarkets CEO Julius Kipng’etich noted that getting rid of the case is in line with their turn-around strategy. “This petition blocked many of the financial facilities that we enjoyed. We expect to unlock some money to the tune of Sh300 million after the petition is withdrawn,” said Kipng’etich.

Cash advance

UBA-Kenya had agreed to advance Uchumi Sh300 million to help keep the retail chain afloat.Uchumi plans to use the money to pay suppliers when they resume trading.

Last week, suppliers agreed to convert half of their old debt into equity in a deal brokered by the government. Uchumi’s total outstanding debt is Sh6.1 billion, of which Sh3.6 billion is owed to suppliers.

Uchumi and the suppliers also agreed to open an escrow account in which all money from the sale of the new supplies would be deposited. Kipng’etich said 106 companies had agreed to continue  supplying. By close of business on Wednesday, 68 of them had already supplied.

The CEO said they would appreciate over 16 suppliers who had stuck with them through the hard times including Brookside, Mini Bakeries, Kevian, Green Forest and Orchard Juice. Others include Eveready, Galana, Mill Bakers and Interconsumer.

Besides converting half of old supplier debt into equity, the retail store has also borrowed about Sh1.2 billion from Government, all of which it plans to spend on suppliers’ debts. Specifically, suppliers owed Sh200,000 or less will be paid from this kitty.

Kipng’etich said the sale of Ngong Hyper is in progress. “The contract has been signed and the buyer has already made a downpayment of Sh400 million,” said Kipng’etich, noting that they hope to complete the transaction by August.

However, the proceeds of this sale will not reach the retail store’s coffers as they have been charged to KCB. He explained that they had agreed on an out-of-court settlement with the aggrieved party on the Kasarani property. “In the next two weeks that (the case) will be over,” said Kipng’etich, adding that they had pledged 100 per cent of the proceeds from Sh2.3 billion property.

Uchumi will also re-enter the Uganda and Tanzania, which were part of the markets that they exited as a measure to stop haemorrhage. However, the CEO insisted this could be done only after stabilising the Kenyan market, which was their base.

“We plan to re-enter our neighbouring countries within three to five years but after stabilising Kenya first. You know Kenya is our base,” said the CEO at Uchumi’s main office in Industrial Area.

The three strategic investors who are supposed to inject Sh5 billion into the Nairobi bourse-listed firm have also done due diligence and the management is only awaiting word from their transaction advisor.