A closed Tuskys store.

| File | Nation Media Group

Tuskys: Once billion-shilling empire now has only Sh41 million

Cash-strapped Tuskys Supermarkets has Sh41.6 million in its only bank account with funds, as it fights off at least 26 cases filed by creditors seeking billions in dues dating as far back as 2016.

But the bank account is frozen, following four separate cases at the Chief Magistrate’s Court in Milimani, Nairobi.

Besides, the Sh41.6 million Tuskys has is hardly enough to cater for all the creditors making a beeline for the retail chain’s main trading account.

Landlords alone are owed in excess of Sh100 million, Hotpoint Appliances is claiming Sh248 million, businessman Pietro Canobbio is owed an estimated Sh200 million while Syndicate Agencies Ltd wants Sh30 million.

And those are only creditors whose debts have been revealed in court papers.

Wind up company for good

Tuskys wants the bank account unfrozen so that it can make baby steps in its journey to recovery, but a section of creditors believe the revival plan will be a stillbirth. They, therefore, would rather have the company wound up for good.

That is where Tuskys, which was once East and Central Africa’s largest retailer by branch presence and revenue, sits today.

In 2017, Tuskys was selling goods worth billions of shillings every year, which logically should have translated into huge profits.

But the broke chain now has to use the little funds it gets to defend at least 26 recently filed court cases, pay some suppliers while still negotiating a financing deal with a mysterious Mauritian investor.

Retailer begs Court

The juggling has not been easy, as the retailer is now begging the High Court to stop any further legal action by its creditors, stop eviction by landlords in any part of the country and suspend execution of any judgment obtained against it.

While there are dozens of recovery suits across the country against the struggling retailer, perhaps the ones that have hit Tuskys hardest are four cases filed at the Milimani High Court in Nairobi by companies manufacturing clothes, furniture and personal protective equipment (PPE).

The textiles and PPE manufacturers struck first as Dignity Collections, Bosky Industries and Eako Holdings obtained orders from the Milimani Chief Magistrate’s Court freezing the retailer’s bank account pending conclusion of the suits.

Afterwards, furniture experts Dong Fang Development Company filed another suit in the same court and also obtained freeze orders.

Liquidation petitions

And the freeze orders are now among the reasons some suppliers are hesitant to oppose the two liquidation petitions filed against Tuskys by Hotpoint Appliances and Syndicate Agencies Limited.

Tuskys says in court papers that it is struggling to ease creditors’ nerves over the freezing of the bank account, which was set up specifically to hold suppliers’ funds.

The little money the retailer is still making from sales has had to be diverted to court cases and settling debts owed to suppliers that have taken action against the retailer.

Court proceedings indicate Tuskys will be filing another application seeking to sell some of its assets to offset the most urgent debts.

Mauritius investor

That no details for the move have been given in court could be an indication that the financing deal with the Mauritius investor is either on the brink of collapse, or that the funds may not be forthcoming any time soon, hence the need for a contingency.

On November 17, 2020, Tuskys told High Court Judge Francis Tuiyott, who is presiding over two insolvency petitions filed against the supermarket chain, that the company intends to file an application to be allowed to sell some of its assets.

The application is expected to reveal which assets Tuskys owns and their value.

The Tuskys application already filed in court seeks to protect, and release, the only asset Tuskys has declared publicly — the suppliers’ bank account linked to the retailer’s tills.

The account was opened as a holding point where all sales would lie before being immediately released to suppliers and retaining only the retailer’s gains.


Interestingly, some of the assets attached by auctioneers, and which one would think the retailer owns, do not belong to Tuskys.

Auctioneers have so far descended on shelves, trolleys, checkout stations and till equipment, furniture and computers, all the while convinced Tuskys owns them.

But in the supermarket business world, a company leases or rents business space and equipment. The retailer then obtains goods to place on the shelves on credit.

Tuskys Supermarket

Shelves inside Tuskys Supermarket along Kenyatta Avenue on January 21, 2021. Auctioneers have so far descended on shelves, trolleys, checkout stations and till equipment, furniture and computers, all the while convinced Tuskys owns them.

Photo credit: File | Nation Media Group

Leased equipment

In Tuskys’s case, for instance, the firm leased shelves and trolleys before getting goods to fill its stores on credit.

Many of the equipment, including the trolleys that auctioneers have targeted, are actually owned by Rentco Africa Limited, which is also one of Tuskys’s creditors.

Rentco leases out virtually anything that a business would need. It had leased equipment to Tuskys in a deal that was to earn Rentco more than Sh500 million.

Tuskys still owes the leasing firm Sh383 million for the equipment that was placed in 19 of its branches across the country.

Rentco has asked the court to protect its assets from auctioneers, who think that Tuskys owns the equipment.

“Tuskys has and continues to be the target of relentless predatory creditor actions including…The levying of distress by landlords against goods owned by third parties including stock supplied for sale on a consignment basis, stock and goods belonging to sub-tenants and licensees operating out of the premises let to Tuskys, as well as tools of trade let for use by Tuskys, including, inter alia,shelving, CCTV and checkout systems, shopping trolleys and power generators,” the retailer says in court papers.

Some landlords who attached assets from Tuskys’ stores unknowingly sold items owned by Rentco and other leasing firms.

Tuskys says in court papers that Greenspan Mall, Juja City Mall, Karen Crossroads and Kilifi Complex Centre are some of the landlords that attempted to auction equipment owned by other firms but leased to Tuskys.

Naivas, a retailer that is majority-owned by cousins of the Tuskys siblings, has since taken over space at the Kilifi Complex Centre.

Just before the liquidation petitions against Tuskys started, the retailer’s shareholders were cooped up in meetings with Mauritius hedge fund Shield Fund PLC.

A day after Hotpoint went to court, Tuskys Board Chairman Bernard Kahianyau announced that a deal had been struck with the Mauritian investor.

And Shield Fund released an initial Sh500 million to Tuskys “as a show of commitment to the transaction”.

From that down payment, landlords received Sh119.6 million, suppliers Sh112.7 million while employees’ salary arrears got a Sh48.5 million allocation.

Tuskys employees protest

Tuskys employees protest outside the City Market branch on October 2, 2020 over unpaid salaries.

Photo credit: File | Nation Media Group

Bank overdraft

Sh219.8 million has been classified in court papers by Tuskys as “old debt”, but some insiders told the Nation that the money may have been swallowed up by an existing bank overdraft to the retailer.

The Nation spoke to multiple sources engaged in the negotiation of a deal with the Mauritian hedge fund.

Tuskys, its officials and individuals involved in the talks had to sign a non-disclosure agreement, which bars them from revealing details of the Sh2.1 billion funding to anyone, including the creditors baying for the retailer’s blood.

In essence, the deal was supposed to open the door for the sale of a majority stake in Tuskys.

After the Sh1.4 billion balance of the deal with Shield Fund PLC has been paid, Tuskys’ shareholders will start the search for a strategic investor in earnest.

Brick wall

But for the balance to be paid out, all creditors have to agree to a restructuring of their dues, and this is the brick wall that Tuskys directors have hit.

With at least 30 major creditors pushing for liquidation, it has become difficult for the Mauritian firm, or any investor for that matter, to bet any form of investment in the struggling retailer whether in loan form or purchase of shares.

On the bright side, Tuskys has reached agreements with over 200 suppliers to restructure their debts.

“Tuskys has also reached out to suppliers individually and has, by virtue of this direct engagement, entered into at least 219 agreements with its suppliers, which agreements are replete with details on how Tuskys intends to supply the suppliers’ debt,” the firm’s lawyer Patrick Ogola said in court papers.

Mr Ogola has also filed agreements with suppliers as evidence.

The suppliers on board will have their dues paid in instalments ranging between eight and 24 months.

As things stand, the court action will proceed as several creditors, including Hotpoint Appliances, which filed the main insolvency suit, refused to any deal without specific details and documents of the Mauritius deal or a clear strategy going forward.

Non-disclosure deal

Unfortunately, the non-disclosure deal prohibits revealing some of the intimate details of the Mauritius deal that some creditors want before halting court action.

For any deal to be reached, one side in the war will have to take a leap of faith.

Three of our sources said that Shield Fund is a special purpose vehicle set up by one of Africa’s largest hedge funds for the Tuskys deal.

One of the hedge fund’s top executives has been in and out of Nairobi for the deal, and has attended dozens of meetings with the Tuskys directors and the negotiation teams since September, 2020.