Uchumi creditors vote to redeem it from liquidation

by Enock Bett · Published March 2, 2020 · Updated March 3, 2020

Troubled Uchumi Supermarkets may have another hope of thriving after its creditors voted to save it from looming liquidation. The creditors today backed the company’s proposed company voluntary agreement (CVA) that paved the way for its debt pardon. The banks will write off half of their accruing arrears while suppliers will discount 30 percent of their pending repayments from Uchumi Supermarket. 74 percent of the creditors voted Uchumi’s CVA representing creditors that owe the retailer a total amount of Ksh.3.5 billion despite the United Bank of Africa’s adamance in its push for compensation.

Company voluntary agreement is a statutory agreement between an insolvent limited company and its creditors. It’s a procedure that gives a second life to a troubled firm through a formal arrangement with the creditors over debt repayment terms that allows it to pay a proportion of the debts, rather than the full amount. CVA comes into rescue when the company’s creditors approve the proposal by a way of voting.

Uchumi Chief Executive Officer Mohamed Mohamed could not hide his joy when the retailer’s creditors voted the CVA. Mohamed described the move as a major trust that the creditors have in their efforts to revive the dying supermarket.

“This is a turning point for us. It shows the level of confidence in both secured and unsecured creditors,” Mohamed said.

The retailer had requested the government last year to support its company voluntary arrangement saying if it had ended up in liquidation, then only secured creditors would have benefitted from the process at the cost of unsecured creditors.

Uchumi Supermarket Chairman, Mr.John Karani said Monday’s CVA voting was a signal of the tough task of turning around the company that is expected of Uchumi supermarket management.

“When people give you a vote of confidence, I always believe it’s a greater challenge than an otherwise decision. The honors are now upon management to translate that trust. The real work begins now” Karani said.

The chain that had shut down its dozens of stores and sold the rest to rivals now has the last hope of regaining its lost glory and will be disposing its landholding in Kasarani which is valued at Ksh.2.8 billion to support the comeback. Cooperative Bank and Kenya Commercial Bank had earlier written off a total amount of Ksh.656 million that was owed to them by Uchumi.