Boost For Uchumi As Court Accepts CVA

Uchumi Supermarkets Plc has received a boost in its recovery efforts after the High Court (Commercial and Tax Division) approved the Company’s Voluntary arrangement (CVA) that was passed at the creditors’ meeting on March 2, 2020.

The High Court’s ruling that was delivered on July 1 2020 gives Uchumi the go-ahead to implement the CVA which will see the retailer offset some debt, pay off part of the remainder in phases and write off a portion of payables.

The payment plan will be implemented over a number of years as per the CVA that was filed in Court.

“The decision gives us a chance to implement our recovery plan. We are very much aware of the challenges in the retail sector which have been worsened by the COVID-19 pandemic but management is engaging with all stakeholders with a view of supporting the industry,” said Uchumi Supermarkets Plc CEO Mr. Mohamed Mohamed in a statement.

The CVA will however be subject to a periodic review through a creditors’ meeting every six months where creditors and other stakeholders will appraise the implementation of the CVA and the financial wellbeing of the retailer.

As part of the CVA Uchumi will look into new business models including but not limited to implementing digital strategies, moving into the convenient store model and adopting cost leadership strategies.

Mr. Owen Koimburi, the legally appointed insolvency practitioner, will implement the CVA.

Mr. Mohammed added that the retailer continues to search for strategic partners and other potential investors.

The approval of the CVA cames at a time when Uchumi Supermarkets Ltd has been given six months to settle its Sh4.7 billion debts to over 100 suppliers or face auction of its assets by creditors and eviction by their landlords.

Under the CVA, Uchumi’s creditors will have to take a 70 per cent loss on amounts owed to them, and the retailer will be expected to put up a committee to ensure that debts are paid on time.

During the court hearing, 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 the court be suspended.

Should Uchumi fail to pay up within the six-month window, it could face death as eviction and repossession of stock will leave the retailer as a shell.

“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…” read the court papers.

Despite opposition from UBA Bank, Justice Mary Kasango allowed the implementation of a Company Voluntary Arrangement (CVA) that 121 suppliers agreed to in March saying 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.

Established in 1975 to open outlets for the distribution of commodities and create retail for Kenyan manufacturers, Uchumi is a supermarket which grew to become one of Kenya’s most-told retail success stories. Nevertheless, for a retailer who was once delisted from the Nairobi Securities Exchange (NSE) and temporarily closed down in 2006, there is much to go by as apart from its current cash-strapped situation