Uchumi survival hinges on date with Creditors

 The Provisional Supervisor in charge of implementing Uchumi Supermarkets Plc proposed Company Voluntary Arrangement (CVA) has set May 13^th 2019 for the first creditors meeting.

The meeting will among other things consider and approve the CVA proposal with or without modifications and shall elect one of creditors to be the chairperson of the meeting to be held at the Bomas of Kenya.

During the meeting, the Board and Management of Uchumi will present the Company Voluntary Arrangement (CVA) to creditors, shareholders and other stakeholders.

The CVA is a detailed strategic review of the retail chain that has been undertaken by the Board and Management of Uchumi Plc and other experienced consultants including Owen Koimburi who was appointed as the Provisional Supervisor on March 20 2019.

“We are confident that the CVA presents the best proposal to ensure that all our creditors including suppliers, lenders, staff and other service providers are able to receive their dues in a timely and orderly process while positioning Uchumi for the next phase of its growth,” said Uchumi Supermarkets Chief executive Mohamed Mohamed.

Mohamed added that whereas Uchumi and the retail sector is facing challenging times due to reducing purchasing power and  rising operational costs, the CVA has taken these factors to present a clear blueprint that will better shield the business from these risk.

To be entitled to vote at the meeting, creditors shall lodge with the Provisional Supervisor a proof of debt form and if necessary, a proxy form, not later than Friday, 10th May 2019.

Uchumi finally notes that it has begun initiating recovery plans including the franchising of its stores and cost leadership activities.

During the meeting, Uchumi’s proposal including any modifications shall be approved by the majority of the creditors present.

Judging by the latest development it appears that Shareholders and investors of Uchumi Supermarkets will have to wait a little longer to get the much sought-after strategic investor after efforts to negotiate a cash injection hit a snag.

This is because of monotonous paperwork – a process the firm said was delaying release of funds from the unidentified financier.

During the company’s annual general meeting (AGM) in March last year which had previously been put on hold to allow time for investor search, Uchumi’s board Chair Catherine Ngahu admitted at the time to facing frustrations.

“We were hoping to make announcements on the investor to our shareholders. We have not yet signed any documents as of now. We have had several prospects, we have had several discussions, and it’s clear that onboarding an investor is a long process, it takes time to raise money in a company in distress, and we are pleading with our shareholders to understand,” he said in March 2018.

In December of 2017, the struggling retailer announced it had settled on a strategic investor who it said at the time had expressed serious intentions of partnering with the chain, even though Uchumi has remained tight-lipped on the identity of the investor – keeping the public guessing.

“At the moment we are not able to reveal the identity of the investor because we at the stage where they (investors) are not willing to be identified, until they sign on the dotted line, it’s a confidential engagement, we are hoping in the next few weeks to have something to shout about” said Ms. Ngahu.

The Nairobi Securities Exchange-listed firm is betting big on the strategic investor expected to pump into the company Sh3.5billion to turn-around its struggling business with the funds meant to locally expand Uchumi brand through franchise models with a long term view to re-enter Tanzania and Uganda markets. Other plans include venturing into e-commerce trading.

The quest for new investment comes even after the retailer had last year received a total of Sh1.2billion bail-out loan from the government through national Treasury in tranche of Sh500million and Sh700 million in December and January of 2017 respectively.

Even then, the retailer continues to battle the wrath of its suppliers, negative investor sentiments and customers’ apprehensiveness alike, with some of its employees also paying the price of its continued struggles. Several Uchumi workers have lost their jobs in recent store closures, with the remaining lot yet to be paid January and February salaries.

“There are plans in place to absorb some of the staff who lost their jobs in store closures within other operational stores. We have started regularizing the salaries which should last three months we are also by next week hoping to finish clearing backlog of salaries in the next seven to fourteen days,” said Chief executive Mohammed Ahmed Mohammed.