- The government seems skeptical Uchumi's recovery plan after several capital infections that failed to bear fruits
- According to the recovery plan, creditors are to take a 70 per cent cut on the struggling retailer’s Sh3.6 billion debt
Broke retailer Uchumi Supermarket could escape liquidation after rallying majority of the creditors to back the Company Voluntary Arrangement (CVA).
Speaking to the Star on phone yesterday, the retailer's CEO Mohamed Mohamed said the firm is awaiting the government's response before presenting the agreement in court next month.
''Our secured creditors are on board. We are waiting on the government before proceeding with the recovery plan,'' Mohamed said.
The government which has a 14.6 per cent stake and UBA Bank which has been seeking to sale Uchumi’s land to settle a Sh172 million debt have been reluctant to adopt a deal presented in May.
According to the recovery plan, creditors are to take a 70 per cent cut on the struggling retailer’s Sh3.6 billion debt on condition that they are represented in its decision-making team.
According to the draft plan, the retailer is projected to make a net profit of Sh61.5 million as at June 30,2020, bouncing back from a net loss (provisional) of Sh515.9 million in the year ending June 2019.
By securing the support of secured creditors which includes KCB Group and UBA Bank, the retailer which was granted 30 days by the court in early November to bring all creditors on board has few days to convince the government to come on board.
The government seems skeptical over Uchumi's recovery plan after past capital infections failed to bear fruit.
When the listed retailer sunk into insolvency on June 1, 2006, the state pumped in Sh675 million and a compromise from the PTA Bank and KCB that saw it reopen shops 45 days later.
Uchumi owed the two banks a total of Sh956.7 million.
Ten years later, the retailer recorded an after-tax loss of Sh2.8 billion in 2016, forcing the state to intervene, promising a bailout of Sh1.8 billion to support its operations which were to be disbursed in three instalments of Sh500 million, Sh700 million and Sh600 million.
In a past interview with the Star, Mohamed said supporting the CVA was the only option left to resuscitate the listed retailer.
''Everyone will lose if the CVA fails,'' Mohamed said.
The support for Uchumi's CVA by investors is likely to avert another eminent collapse of a local retailer, just a week after another local retailer, Nakumatt, finally shut shop after creditors voted for its liquidation.
The retailer had in May applied to have Owen Koimburi as the interim supervisor as per the Insolvency Act 2015 to oversee the recovery plans while securing the interests of the creditors.