Uchumi investors in last effort to end debt crisis
By Jackson Okoth
Uchumi shareholders have approved plans by its directors to reduce the Sh1.2 billion debt, a figure that includes all the accrued interest as at December, last year.
The move will see the chain move closer to lifting itself out of receivership.
This is after the chain’s shareholders approved plans by its directors to settle or reduce the firm’s Sh1.2 billion debt. This figure includes all the accrued interest as at December 31, last year.
The plan involves conversion of a Sh675 million loan, pumped into the business by the Government three years ago, into equity. The loan has accumulated to Sh875 million inclusive of interest.
Some Sh350 million of this debt is to be converted to equity, creating 35 million ordinary shares and therefore a 13.3 per cent Government ownership in the retail business.
Shareholders also approved plans to convert Sh211 million in debentures held by Kenya Commercial Bank and PTA bank into equity, creating an extra 21.1 million ordinary shares.
Further, a suppliers’ debenture of Sh264 million will also be converted into equity, resulting in 26.4 million shares. After all the conversion is complete, Uchumi’s shares will increase from the current 180 million to 268 million shares.
"We shall also be seeking to restructure all outstanding bank loan balances so that we can repay them within 12 months," said Jonathan Ciano, Uchumi’s receiver manager.
Both KCB and PTA have already written to Uchumi’s board listing conditions that must be met before the receivership is lifted.
One of their key concerns is whether Jonathan Ciano will be retained as the chief executive when the firm climbs out of receivership.
Also clouding Uchumi’s road to recovery is the firm’s negative working capital. As at June 2009, its current assets stood at Sh1.8 billion exceeding current assets worth Sh1.04 billion.
While the chain has not made a formal application to be re-listed at the Nairobi Stock Exchange, it will have to meet the listing requirements. This includes the fact that a company must have a profitability truck record of at least three years before it can be listed at the bourse.
Since June 2006 when Uchumi’s rescue plan became operational, the retailer made a pre-tax loss of Sh256 million in 2007 before turning profitable in 2008 and 2009.
Uchumi’s outstanding bank loan stands at Sh132 million as at December last year from a Sh957 million in 2006.
The chain briefly shut down its operations between June and July 2006 after it plunged into a financial crisis.
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