Local shareholders of Choppies will bailout the retailer to settle part of its supplier debt estimated at Sh600 million as it looks to restock its stores and inject life into the firm in a last ditch effort to save the business.
Choppies says Export Trading Group (ETG), its local shareholder with a 25 percent stake, has come up with a recapitalisation plan that will help restock its shelves as suppliers get their cash in three tranches.
It was not immediately clear whether ETG’s cash injection is an intention to rack up its stake or may lead to a buyout.
A deal inked by the troubled retailer and the Association of Kenya Suppliers (AKS) will see Choppies release 50 percent of cash owed to creditors who sign the agreement on condition that supply is resumed.
The other 50 percent will be paid into two tranches and settled within three months after every six weeks.
“For Choppies making the initial payment of 50 percent, suppliers need to sign this payment plan and delivery plan. The supplies shall resume based on our LPOs with the existing payment terms in place as soon as the first payment of the 50 percent is done,” says Parin Patel of Choppies in the agreement.
Some suppliers who spoke to the Business Daily have expressed optimism in the deal, indicating that they are willing to engage with the retailer on the proposed terms, which may just save the supermarket chain.
“We have goodwill they are genuine because they are the ones who came up with the proposals and this is a better way to deal with this rather than going to court,” AKS chairman Kimani Rugendo said.
Choppies has suffered huge stock-outs that have almost pushed it over the brink, with the most recent casualties being the Bungoma and Kiambu branches that were recently shut down.
The Botswana-based retailer started as a single store in 1986 and has grown to South Africa, Zimbabwe, Zambia, Mozambique, Namibia, Tanzania and Kenya where it has 12 stores after acquiring Ukwala Supermarket.
It had planned to set up two new outlets this year when it ran into financial difficulties at a time when the parent company was also hit by troubles in Botswana.
Choppies CEO Ramachandran Ottapathu was fired in May following a tumultuous year that saw the firm suspended from trading on the Botswana and Johannesburg stock exchanges where it is cross-listed.