Uchumi Supermarket has filed for bankruptcy in Uganda as it moves to contain losses from claims by suppliers, employees and creditors arising out of a decision to close it’s subsidiary.
Uchumi (Uganda) Limited’s voluntary wind up application, which is now before the High Court, will be heard on February 22 after it was directed to serve all its creditors ahead of the planned hearing.
Market analyst, Mr Al Khan Satchu, termed the move as clever since it would safeguard its Uganda properties as well as its Kenya operations after an unsuccessful stint in the neighbouring country that was marked by incessant losses.
“Filing for bankruptcy is probably an astute move in order to ring-fence Uchumi Uganda and thereby kill it. The Uganda experiment was ill-conceived - The sites chosen (like zero footfall) signals the choosing was done against the interests of the company. So sensible move, in my opinion,” said Mr Aly Khan Satchu in an interview on Wednesday.
BLAMED LOW SALES
In the papers before the Uganda court, Uchumi’s board of directors blamed low sales, stocks and fraud for collapse of the operation.
“Your petitioner has had working capital constraints that have resulted in delayed payments to suppliers. As of July 31, 2015, your petitioner had outstanding payables amounting to Sh262 million,” said company secretary John K. Wambugu in an affidavit to the court.
The High Court invited all interested creditors to reply to Uchumi’s petition within 15 days from December 10, 2015 the date they were notified through a court directive.
More than a dozen creditors including Crown Bottlers, Century Bottling Co. Ltd, Nateete Shopping Centre, Samona Products, Dembe Trading and landlords are seeking their dues from Uchumi Uganda.
Staff have also included the rest of the shareholders in their lawsuit, plus the chief executive officer Julius Kipng’etich.
At the same time, Uchumi Supermarket has expressed optimism in finding a buyer for its Nairobi Ngong Hyper which it intends to sell for a reserved price of Sh2 billion. Also targeted for disposal is the Kasarani 20 acre parcel of land in Nairobi.
The board is waiting for approval from shareholders during the retailer’s annual general meeting slated for January 20 before proceeding.
A statement to shareholders also notes that the board would also recommended that the company’s capital be increased from Sh5 billion to Sh10 billion made up of 1.9 billion ordinary shares worth Sh9.5 billion.
Also to be approved is issuance of 25 million preference shares by way of debt capital which could later be converted to equity capital and also seek shareholders’ authority to invite a private investor expected to inject up to Sh5 billion into the struggling publicly listed company.