Uchumi turns to frantic talks to thwart wind up suit

Customers ponder the next move after Uchumi Supermarket Kisii branch closed down on March 21, 2016. Uchumi Supermarkets has called for crunch meetings with creditors and suppliers in an attempt to forestall court cases that are calling for its closure. PHOTO | BENSON MOMANYI | NATION MEDIA GROUP

What you need to know:

  • Uchumi owes suppliers Sh3.6 billion, with another Sh2.5 billion debt held by banks.
  • The troubled supermarket met the suppliers last week who have now agreed to oppose the winding up petition.
  • The suit is a do-or-die for one of Kenya’s oldest retailer, which is currently under a cash crisis.

Uchumi Supermarkets has called for crunch meetings with creditors and suppliers in an attempt to forestall court cases that are calling for its closure.

The retail chain says it wants to avoid a lengthy court process, initiated by seven of its suppliers seeking to declare it insolvent over a part of their debt, that has thrown a spanner into the works of its revival plans.

In a meeting held on Tuesday at the office of the Principal Secretary for International Trade Chris Kiptoo, Uchumi’s management and a section of the retail chain’s creditors resolved to meet seven suppliers who have filed for winding up of the business in a bid to reach a consensus to withdraw the petition.

“I know we will succeed, I have talked to the seven suppliers to make them understand the path they had taken will not be good for anyone,” Uchumi boss Julius Kipng’etich said on Tuesday.

Uchumi owes suppliers Sh3.6 billion, with another Sh2.5 billion debt held by banks with charged assets against a total asset base of Sh6.1 billion, which puts the retailer in a negative net assets position.

The litigants, imports and supply firm Ceccagnoli Italiano Ltd, Kenblest Group, Githunguri Dairy, Kappa Oil, Insync, StarTimes and Nairobi Bottlers are owed just over Sh300 million.

WINDING UP PETITION

The retailer has convinced some of the suppliers who hold the bulk of their debt to convert part of it to equity.

The troubled supermarket met the suppliers last week who have now agreed to oppose the winding up petition. The Association of Kenya Suppliers chairman Kimani Rugendo told the Nation that two of the companies that have filed the suit have agreed to pull out in principle, without revealing their identity.

The suit is a do-or-die for one of Kenya’s oldest retailer, which is currently under a cash crisis after the board of some of the lenders willing to finance its revival began to grow cold feet.

The Lang’ata branch of Uchumi is partly charged to United Bank for Africa (UBA) under a Sh250 million short-term facility to pay suppliers.

The lender says it is willing to offer more support if the winding up suit is dealt with as it cannot securitise its lending with a company under a winding up petition.

The Kenya Commercial Bank (KCB), which holds the charge to the Ngong Hyper branch that Uchumi has already sold at Sh1.4 billion, is unwilling to allow proceeds of its sale to reach the retailer.

“We need to talk to KCB, money from Ngong Hyper has begun to flow and no other bank is willing to give us money because of the petition,” said Mr Kipng’etich.