Uchumi limps on as creditors approve new rescue deal
By Wainaina Wambu | March 3rd 2020
An intense seven-hour meeting yesterday breathed new life into Uchumi Supermarkets after creditors owed more than Sh5 billion voted for the second time to have the retailer’s debts restructured.
Creditors including banks, suppliers and shareholders agreed on the Company Voluntary Agreement (CVA) that will see them take a 30 per cent haircut and get repaid in parts within six years.
Aside from the haircut, 40 per cent of the debt owed to unsecured creditors will be converted to non-cumulative convertible preferred shares.
The other option on the table had been liquidation of the 45-year-old retailer, which would have seen thousands of suppliers - who make up the list of unsecured creditors - walk home with nothing.
The firm has a deficit of Sh7.6 billion if it was wound up.
Uchumi Chairman John Karani welcomed the vote of confidence, saying the real work had now begun and that the firm could be restored to its former glory.
“You cannot write us off yet. The Uchumi story continues unfolding with the confidence that has been expressed here today by those who stand to lose most,” he said.
“All we have here is a new lease of life to bring Uchumi back on its feet and we know we can do it.”
The retailer’s fortunes have fallen sharply in recent years, with its share selling at Sh0.28 yesterday at the Nairobi Securities Exchange. It once boasted 1,500 direct jobs but now only has 200 staff.
The firm is currently operating seven branches countrywide - Aga Khan Walk, Adams, Jogoo Road, Meru, Eldoret, Nairobi West and Lang’ata.
Dubbed project Mara, the CVA will now be taken to the High Court for registration by Owen Koimburi, the Uchumi independent supervisor, so that it can start being implemented.
The troubled retailer is seeking to dispose some of its land and hopes the CVA will help attract a strategic investor to inject capital and turn it around. It also seeks to optimise performance through a new business model.
Out of the four banks - secured creditors - who were present at the vote, three voted for the CVA. Uchumi CEO Mohamed Mohamed said he could not disclose their names until the CVA was registered.
One of the secured creditors had rejected the CVA last year, prompting the second vote. However, Mr Koimburi said the latest vote will bind all the creditors once adopted.
Uchumi hopes to earn Sh2.8 billion from the sale of a piece of land in Kasarani, which is however also claimed by Kenya Defence Forces.
Mr Mohamed said the matter was currently at the Attorney General’s office and the renewed CVA agreement would see the issue fast tracked.
“The disposal of that asset is not sufficient to clear all the debts that we have, that’s why we went into this CVA to agree on how the debt can be restructured,” he said.
“As the business improves we can always look into how that balance can be changed.”
Some of the secured creditors that will receive a lump sum payment in the CVA include UBA (Sh10 million) and Co-operative Bank (Sh16.3 million).
KCB is set to receive a full and final settlement of Sh900 million under the CVA.
ICDC’s debt will be restructured for seven years, 95 per cent of UBA for seven years, and 54 per cent of Co-op Bank lease for five years of the total outstanding balance paid on a quarterly basis.
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