Uchumi Supermarkets (in receivership) has now formally asked shareholders to subscribe to a bond to raise Kshs 650 million ($9.85 million). These bondholders will rank alongside the government who lent Kshs. 675 million to Uchumi last year, but subordinate to (paid after) to bank ‘s debt
The bond offers 10% per annum, (which is more than any bank savings account in the country) and is allocated at a rate of 5 shillings for each share held (minimum subscription is 5,000 shillings, in 1,000 increments thereafter) D/L is 31/7
While the solicitation for the bond mentions the company’s’ very successful and impressive turnaround in receivership, there are no numbers to back this up.
I remain a faithful shopper (for groceries & other household items) at Uchumi, but as a shareholder, it is prudent to ask some questions before considering reinvesting:
– What is the performance of the company in receivership? Is it profitable on a monthly basis? Is it generating or consuming cash? Putting together a bond prospectus is expensive and a receiver manager is under no obligation to disclose financial performance to shareholders – but Uchumi
was is a public company and disclosing such information to potential investors and the public should not coats more than 100,000 by way of a newspaper advertisement
– What is the level of bank debt and has it gone down? How much is still owed to the banks i.e. KCB and PTA? This is the 4th or 5th time the company is raising money in 3 years (after the 1.2 billion rights issue, 300 million suppliers assistance, 657 million from the government, 300 million attempted from shareholders
– If company is doing so well (media have reported 50% improvement over Uchumi’s best ever recent year), what was so wrong that the company collapsed? I have written before on how receiver managers can sometimes be better managers than the owners of a company and would like to see if this is a textbook example.