Uchumi Supermarkets shares gained 6.9 per cent on Monday after suppliers agreed to a new debt repayment deal.
The creditors will now take a 70 per cent cut on the struggling retailer’s Sh3.6 billion debt on condition that they are represented in its decision-making team.
Banks, including KCB Group and UBA Bank, however, did not officially endorse the plan even as Uchumi goes back to court to stop creditors from winding it up over liquidity problems, rendering it technically insolvent.
The retailer has applied to have Owen Koimburi as the interim supervisor as per the Insolvency ACT 2015 to oversee the recovery plans while securing the interests of the creditors.
“Today marks an important milestone as our stakeholders have shown confidence in the Uchumi brand. The Company Voluntary Agreement (CVA) will now be taken to the court by the insolvency practitioner” said Uchumi Supermarkets Chief Executive Mohamed Mohamed.
Creditors appointed Kimani Rugendo as their representative.
The retailer is fighting to stay afloat after years of decline.
It was first saved during President Mwai Kibaki’s regime under turnaround plan spearheaded by then boss Jonathan Ciano.
It was subsequently delisted from the stocks exchange but got back into the bourse five years later after going into receivership.
In 2016, Uchumi was back in the doldrums after suppliers quit over unpaid stock, sending the retailer back into a tailspin.
It later turned to Julius Kipngetich, former Equity Bank Chief Operating Officer and Kenya Wildlife Service Director known for his turnaround acumen.
However, his efforts to turn around the ailing retailer were frustrated by huge debts, hostile suppliers and a tough operating environment. Uchumi then recruited Mr Mohamed, formerly the retailers Chief Finance Officer.
His strategy revolves around fast-tracking the franchise model – Uchumi Express.