Uchumi pleads for release of Sh600m Treasury bailout
What you need to know:
- Retailer says the funds delay is frustrating ongoing process to bring on board an investor
- Uchumi was given a Sh700 million Treasury bailout last year out of the Sh1.3 billion it had requested from the government.
- Mohamed Ahmed Mohamed, the Uchumi chief executive officer Tuesday said the process of bringing on board the investor to inject Sh5 billion fresh capital through issuance of new shares had stalled.
- The prospective investor had offered to release Sh3.5 billion.
Struggling retail chain Uchumi Supermarkets #ticker:UCHM wants the government to release a Sh600 million shareholder bailout loan to help it negotiate the entry of a new investor in the business.
The partially State-owned listed retailer Wednesday told Parliament that the government put the bailout cash on hold making it difficult for the management to pursue pre-financing from a strategic investor.
Uchumi was given a Sh700 million Treasury bailout last year out of the Sh1.3 billion it had requested from the government.
Mohamed Ahmed Mohamed, the Uchumi chief executive officer Tuesday said the process of bringing on board the investor to inject Sh5 billion fresh capital through issuance of new shares had stalled.
The prospective investor had offered to release Sh3.5 billion.
Mr Mohamed said told the Senate’s committee on Trade, Industrialisation and Tourism that the retailer was expediting the sale of its land in Kasarani, Nairobi to settle part of supplier debts and negotiate the resumption of supplies.
It is expected the Kasarani land could fetch up to Sh2.8 billion with Mr Mohamed expecting a minimum of Sh1.6 billion.
“Discussions are ongoing to renegotiate supply chain financing with banks and suppliers. We are doing this together with technology partners,” Mr Mohamed told the committee chaired by Kirinyaga Senator Charles Kabiru.
Probe crisis
The team is investigating the crisis facing the retail sector following the near-collapse of Nakumatt supermarket.
Mr Mohamed said despite the government bailing out Uchumi through a Sh1.8 billion loan in 2017, the company had a negative capital position of Sh4.687 billion as at the end of April.
“At the minimum the company requires an equivalent amount to return to solvency and an additional Sh1.8 billion for operations and business growth,” said Mr Mohamed.
He added that it had been impossible for Uchumi to access credit from banks.
Mr Mohamed said, for instance, Uchumi’s board had approved a Sh800 million bridging finance from Kenya Commercial Bank (KCB), a proposal that was declined.
He said a proposal for conversion of 50 per cent of suppliers’ old debt to unlock Sh1.8 billion was also shot down by majority with only 22 suppliers showing willingness.
Mr Mohamed said Uchumi’s management is implementing a restructuring of its balance sheet that has seen the closure of 14 non–performing branches in Kenya and two in Tanzania and Uganda.
“This has resulted to rent reduction from Sh86 million to Sh27 million. We have offloaded 1,600 excess employees and staff cost reduction from Sh127 million to Sh36 million,” he said.
