Cash-strapped Uchumi seeks Sh500m loan to pay suppliers
What you need to know:
- Speaking to Daily Nation, Uchumi’s Chief Executive Officer Jonathan Ciano said the retailer’s board of directors had approved a decision to borrow money to pay suppliers.
- This affected its credit rating, forcing suppliers and other creditors to demand tough repayment terms that strained the retailer’s cash flow.
- Heavily indebted and unable to pay its suppliers, the supermarket was put under receivership between July 2006 and March 2010.
Uchumi Supermarkets is seeking a Sh500 million bank loan to pay its suppliers. Already, the cash-strapped listed retailer has approached Kenya Commercial Bank to provide the financing.
Speaking to Daily Nation, Uchumi’s Chief Executive Officer Jonathan Ciano said the retailer’s board of directors had approved a decision to borrow money to pay suppliers.
“We are borrowing Sh500 million to clear the dues,” said Dr Ciano, whose term as CEO comes to an end next month.
Heavily indebted and unable to pay its suppliers, the supermarket was put under receivership between July 2006 and March 2010.
Dr Ciano, who has been credited with turning around the retailer, has steered the firm through thick and thin since its revival. A highly competitive retail sector, delay in payments to suppliers and debt have put the supermarket in a fix even as it tries to remain afloat and expand in East Africa.
CREDIT RATING
This affected its credit rating, forcing suppliers and other creditors to demand tough repayment terms that strained the retailer’s cash flow. This forced the supermarket to borrow Sh405 million from Co-operative Bank in September 2014 to pay its suppliers.
In the financial year ending June 2013, Uchumi declared a dividend of Sh0.30 per share, marking a complete turnaround after going under in June 2006. In that period, the retailer moved from a debt position of about Sh2.2 billion to a debt of Sh600 million towards the end of 2014.
The government established Uchumi Supermarket in 1975 to enable the supply of manufactured goods and products in Kenya.
The firm’s presence now transcends Kenya with branches in Tanzania and Uganda. Other local supermarkets operating in domestic as well as the East African markets include Nakumatt, Tuskys, Naivas and Ukwala.
Last month, South Africa’s Massmart entered the Kenyan market through its flagship Game brand at the Garden City shopping mall on Thika Road, in Nairobi.
French retailer, Carrefour, has also booked space at the upcoming Two Rivers mall in Runda, a Nairobi suburb. Botswana retailer, Choppies, is also eyeing entry into Kenya after it announced it would acquire 10 Ukwala Supermarket outlets at nearly Sh1 billion.
