Uchumi suppliers drop wind up suit
Uchumi’s hopes of turning around its operations received a shot in the arm after 15 of its suppliers dropped a wind up petition against the retailer.
The suppliers who had moved to court over unpaid dues, sought to liquidate the firm to access money owed to them.
In an interview with Citizen Digital, Uchumi Chief Executive Officer Julius Kipng’etich welcomed the move adding it now paved the way to engage strategic investors and the government over plans to inject capital to revive the business.
“Initially the understanding was that probably Uchumi had some money that it could pay. But we were able to demonstrate to them that money was not available and that value will only be unlocked when we removed that case from court,” Mr Kipng’etich said.
Uchumi owes its suppliers Sh3.6 billion and is believed to have struck an out of court settlement with two retailers that were yet to withdraw from the suit. The retailer had on occasion demonstrated to its suppliers that liquidation would not benefit suppliers given its negative equity position. The 41 year old retailer has liabilities to the tune of Sh6.1 billion against assets worth Sh5.8 billion.
Among the suppliers that had taken Uchumi to court over unpaid dues include San Giorgio, Radio Africa, Githunguri Diaries, Professional Marketing Services, WoW Beverages, Star Times among others. Githunguri Dairies and San Giorgio were the last two to pull out of the suit paving the way for dropping of the case.
Uchumi had earlier in the week engaged its banks and suppliers in an effort of coming up with an amicable plan to turnaround operations. It is believed that Uchumi agreed to a settlement plan with the two companies which are collectively owed Sh135 million.
Mr Kipng’etich said following the drop of the suit, Uchumi would be able to engage banks on a payment plan to settle future payments to suppliers.
“The immediate thing is to unlock banking facilities. Many banks were hesitant to deal with Uchumi because of the winding up suit because a transaction which happens when they is a winding up petition has no force of law,” he said.
Already suppliers have agreed to convert half of the Sh3.6 billion debt owed to them into a stake in Uchumi. The agreement gives Uchumi headroom to settle the outstanding Sh1.8 billion without straining its finances.
The move is also expected to speed up capital injection from strategic investors as well as the government.
Uchumi is seeking Sh5 billion from a strategic investor while the government has issued a string of conditions Uchumi will have to meet before injecting a further Sh1.2 billion.
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