Uchumi Supermarkets’ woes continue to pile after the retail chain was given six months to service its sh4.7 billion debt to over 100 suppliers or face auction of its assets by creditors and further evictions from its remaining stores.
Last week, the retailer got a reprieve after the High Court marked an insolvency petition against Uchumi as settled and withdrawn following an out-of-court deal with suppliers.
Despite spirited opposition from UBA Bank, Justice Mary Kasango allowed the implementation of a Company Voluntary Arrangement (CVA) that 121 suppliers agreed to in March with the retailer.
Under the CVA, Uchumi’s creditors will have to take a 70 percent haircut on amounts owed to them, while the retailer will be expected to put together a committee to ensure that debts are paid on time.
Justice Kasango allowed implementation of the CVA on condition that Uchumi pays all its debts within six months, and in turn, all money claims currently before court be suspended.
“In the event, the company defaults, a person may take steps to enforce security over the company’s property only with the consent of the supervisor or with the approval of this Honourable Court; A person may take steps to repossess goods in the company’s possession under a credit purchase transaction only with the consent of the supervisor or with the approval of this Honourable Court” ruled the judge.
“The company’s landlords may exercise a right of forfeiture by peaceable re-entry in relation to premises let to the company only with consent of the Supervisor or with the approval of this Honourable court,” she added.
This ruling boards death for Uchumi which is already a heavily indebted empty shelves retailer.
Seizure of the retailer’s properties could spell the end for the once vibrant supermarkets chain.
In March, UBA had faulted Uchumi for classifying only KCB and Cooperative Bank as secure creditors.
Secure creditors have a hold on assets as collateral, which can be auctioned to recover debts in the event of default.
Justice Kasango in her ruling said that UBA did not provide any evidence to show that KCB and Cooperative do not have any collateral hence the claim of misclassification could not stand.
Creditors met Uchumi representatives in March, and 121 voted to implement the CVA while 28 opposed the move. Three votes were spoilt.
Those that voted yes have a total debt claim of Ksh3.5 billion meaning they will painfully have to accept a 70% haircut or 30% of their money.
Those opposed to implementation of the CVA are owed Ksh1.18 billion and will have to settle for Ksh355 million pay out.
To pay its creditors, Uchumi was banking on the sale of a 20- acre piece of land in Roysambu but those hopes were dashed when the Kenya Defence Forces (KDF) occupied the land last year claiming it was compulsorily acquired in 1985 for a military base.