Administrator gets another stab at saving Nakumatt

Managing Director and Chief Executive Officer Atul Shah of the Nakumatt Holdings speaking on phone during demolition of Ukay Centre a four storey building illegaly constructed on riparian areas after being earmarked by Nema. [Jonah Onyango, Standard]

Nakumatt’s court-appointed administrator has been given another shot to sort out the mess at the troubled retailer following a year of frustrations by creditors.

Justice Mary Kasango extended Peter Kahi’s tenure for another 12 months during which he is expected to undertake another financial audit of Nakumatt and convene another meeting with creditors within four months in a bid to solve the long-running impasse.

Mr Kahi is expected to report back to the court decisions reached with the creditors a month after meeting them.

“The appointment of Peter Obondo Kahi is hereby extended for a period of 12 months from January 22, 2019,” said Justice Mary Kasango of the High Court in a ruling delivered on Tuesday.

“The administrator shall conduct the financial position of Nakumatt Holdings Limited (NHL) within four months from today… these accounts shall inform the creditors’ meeting whereby the administrator shall present a report to the creditors.”

The creditors rejected the administrator’s recovery plan at a mediation meeting in March last year, sinking the troubled retailer into further financial turmoil. Mr Kahi had moved to court following a year of acrimonious relations with the creditors, seeking orders to segregate them.

The creditors, who are owed close to Sh36 billion by Nakumatt for goods and services supplied, shot down Mr Kahi’s proposals that included conversion of some of their debt into equity as well as staggered payments, some spread over an eight-year period to 2026.

Other than suppliers of products on the retailer’s shelves, other creditors included banks, employees and even Kenya Revenue Authority (KRA) that had not been paid certain taxes.

In his latest attempt to salvage the retailer, Mr Kahi is unlikely to have it easy, with most of the creditors expected to continue their push for their pay.

This is especially due to the fact that Nakumatt’s assets are far less than the total debt owed to them.

In the report issued in March last year, the administrator noted that if creditors demanded liquidation of its assets, out of the total Sh35.8 billion owed, Sh30.6 billion is unlikely to be paid.

When she issued her orders on Tuesday, Justice Kasango noted the chain’s problems had worsened last year.

“It is clear that the indebtedness that NHL is enormous. Since the administrator’s report in March 2018, many adverse changes have occurred against NHL… some of these changes are that one of the existing branch of NHL, Ukay Branch, was demolished by the Government for encroaching on riparian land and secondly, a major investor namely Tusky’s declined to invest in NHL,” she said.

According to the March 2018 report by Mr Kahi, in the 10 months between February and December 2017, Nakumatt reported a Sh23.4 billion net loss.

This is in comparison to its heydays when its revenues had grown from Sh40 billion in 2013 to 2016’s high of Sh52.2 billion while reporting in excess of Sh1 billion in profit before starting the sharp descent the next year.

Nakumatt operated a total of 64 outlets across East Africa as of December 2016 (45 in Kenya, nine in Uganda, five in Tanzania and three in Rwanda.