Nakumatt to sack 1,200 employees in new revival bid
By Dominic Omondi and Macharia Kamau | March 13th 2018
It will take more than a miracle for Nakumatt to recover from its financial woes, with the struggling retailer now pushing the repayment of debts to as late as 2026.
Nakumatt is also expected to shed about half of its workforce in its latest turnaround attempt, according to proposals contained in a report by its new administrator.
Peter Kahi, the court-appointed administrator, proposes cutting down the number of employees to 1,800 from the current 3,000 in a bid to bring down the wage bill. The retailer previously had a high of 6,000 employees.
“The downsizing and rightsizing will greatly impact the number of employees the company will require,” said the administrator. Mr Kahi puts the embattled supermarkets’ assets at Sh3.9 billion against liabilities of Sh35.8 billion.
Mr Kahi proposes a decade-long restructuring process that will involve convincing suppliers to take a majority stake in the firm that they can dispose of in an initial public offering (IPO) in 2024.
He notes that both Nakumatt’s debt levels and interest on the debt are unsustainable.
“The debt levels of NHL (Nakumatt Holdings Ltd) are very large in comparison to the size of the turnover and the profitability of the company and is unsustainable both in terms of debt service and interest where due to various financiers,” says the administrator. To ease the burden on interest rate payment, Mr Kahi proposes that banks charge Nakumatt a lower rate than the prevailing 14 per cent.
He further proposes the conversion of most of the debt into equity. The deal would see suppliers waive 25 per cent of their debt while converting the remaining 75 per cent into equity. Most of the liabilities are the debt owed to suppliers amounting to Sh18.6 billion.
Kenya Revenue Authority is owed Sh1.8 billion in unpaid taxes. Nakumatt owes banks about Sh6.9 billion, with Diamond Trust Bank of Kenya having the lion’s share at Sh3.6 billion.
Other lenders that have their money stuck at the retailer include Kenya Commercial Bank (Sh1.7 billion), Standard Chartered Bank (Sh805 million), and Bank of Africa (Sh328 million). United Bank of Africa and GT Bank are owed Sh126 million and Sh104 million respectively.
Employees, who have intermittently taken to streets to protest at late payment of their dues, will receive only Sh680 million out of the Sh1.37 billion they are owed. The first tranche (Sh680 million) will be paid by February 28, 2019, while the balance will be staggered over seven years.
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