Troubled supermarket chain Nakumatt applied for voluntary administration to enable the chain to continue operations while freezing a mounting series of claims from banks, mall landlords
, suppliers and other creditors as they seek options on how best to survive.
Nakumatt in administration
The move effectively ends the management of Atul Shah and surrenders decision-making at Nakumatt to Peter Kahi of PKF Consulting. One of the first orders of business of the company in administration will be for Kahi to draw and publish a statement of Nakumatt’s assets and debts
while separating bank ones, preferential creditors, unsecured creditors, and connected creditors. Up to now, the true and total debt has been a matter of speculation that could be up to Kshs 30-40 billion.
The Nakumatt statement reads that “the senior lenders are aware of Nakumatt’s financial position and are supportive of Nakumatt’s application for an administration order. Further, Tusker Mattresses Limited has, subject to the Competition Authority of Kenya’s approval, undertaken to forge ahead with its investment in Nakumatt in connection with its proposed merger with Nakumatt.”
Past funding proposals prior to the Tuskys deal under consideration have not materialized
. The insolvency law, which Nakumatt cites in its application for administration is among a series of new corporate laws passed in 2015 and is now focused on bringing troubled companies back to life. Aspects of the laws have been used at distressed companies including Uchumi and Kenya Airways. Going into administration lowers the voting powers of banks, who are secured, and it gives Nakumatt power to deal with the unsecured debts. The banks themselves were legally prevented from appointing an administrator as there have already been cases filed by some creditors asking for the liquidation of Nakumatt.
Last week there was a surprising newspaper story that businessman and former MP Harun Mwau had sold his (7.7%) shares in Nakumatt supermarkets.
Businessman John Harun Mwau has sold his 7.7 per cent minority stake in Nakumatt Supermarkets ahead of the retail chain’s plan to take on board a new shareholder with deep pockets to pull it out of a bourgeoning debt crisis.
Late last year, when Nakumatt acquired three stores in Western Kenya they had released a statement which noted that:
Currently enjoying a less than 25% market share of the formal retail space, Nakumatt Holdings, is actively seeking to retain a bigger slice of the mid to premium segment. Through the strategy, the retailer has been working, to grow its gross revenue to over US$1billion in the medium term period while growing its network footprint across East Africa.
Nakumatt has been in the news for the last 6 or 7 years. It was embroiled in the closure of Charterhouse Bank in which it owned 10% and was widely accused of using the bank to launder money and evade taxes. Nakumatt then went ahead and published a lengthy declaration of defense explaining its’ relations with Charterhouse, tax payments (in relation to income), revenue, stores, and compliance with Kenyan law etc.
The new Nakumatt deal comes at a time of unprecedented activity in the retail sector activity both in mall development and supermarket chains. It also coincides with reports of cash flow issues at Nakumatt, seen in slow payments to suppliers, as have had other supermarket chains, including Uchumi earlier this year.
It is expected that exit of Mwau will lead to another deal at Nakumatt that will bring on board new shareholders, both local or foreign.