Home ECONOMY End of an era as Nakumatt dissolved after creditors’ vote

End of an era as Nakumatt dissolved after creditors’ vote

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Companies

End of an era as Nakumatt dissolved after creditors’ vote

Nakumatt
Nakumatt, which grew from a mattress shop in Nakuru to have branches across Kenya and East Africa, was forced to close down dozens of outlets from 2017 as it struggled to repay its suppliers, landlords and other creditors. FILE PHOTO | NMG 

Nakumatt creditors on Tuesday voted to dissolve the former giant retailer, dimming any hopes of recovering Sh38 billion the supermarket owes both creditors and suppliers.

About 97 percent of the 169 creditors present at the meeting in Nairobi supported the retail chain’s dissolution, formally ending the Nakumatt brand.

The creditors, who include banks, suppliers and landlords, are owed Sh38 billion and the administrators will share out about Sh422 million that was raised from the sale of six Nakumatt branches to Naivas.

Peter Kahi, the court-appointed administrator of the troubled supermarket chain, said the next stage is to appoint a liquidator who will pursue firms and individuals that owe Nakumatt and pay off secured creditors, including banks, which are owed Sh13.2 billion.

“Most creditors appear to have moved on, which explains why they did not attend today’s meeting,” said Mr Kahi, adding that those owed Sh16.4 billion participated in the voting.

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Banks are seeking to hire a private investigator to trace and identify assets linked to former chief executive Atul Shah over loss of billions of shillings at the stores.

Mr Shah and his son, Ankoor Shah, are accused of accessing and failing to refund interest-free loans amounting to Sh1 billion from the retail chain when its stores were struggling to repay suppliers, landlords and other creditors.

“We are demanding that you compel Mr Atul Shah and the other directors of the company to return Sh1 billion interest-free loan they took from Nakumatt. We want the money back,” said one creditor at the meeting. Mr Shah is also in trouble for writing off stock worth Sh18 billion in May 2018, just weeks before the company grounded to a halt, in what is linked to possible theft of suppliers’ goods.

“With the sale of assets to Naivas Ltd having been concluded, the administrator distributes and appropriate funds of the company to the various classes of creditors in line with IA 2015, after meeting costs of the administration,” said Mr Kahi of the Sh422 million received from Nakumatt.

The six branches were expected to help the retail chain as it went back to the drawing board to rewrite the wrongs, pick up the pieces and bounce back having learnt from its mistakes. However, it appears this dream can no longer become a reality.

“An attempted turnaround of the business would be very costly and the company is likely to be lossmaking for the better part of the turnaround window, implying that such a turnaround would need to be financed by additional debt to sustain operations before achieving break-even,” said the notice on creditors’ voting.

“The company also has no assets to collateralise such additional funding. The administrator is of the view that it is likely to be difficult to attract an investor to inject the substantial amount of equity required to restructure NHL’s balance sheet due to the current high degree of financial leverage.”

Nakumatt went into voluntary supervision in early 2018 after seeking protection from its creditors.

The chain, which grew from a mattress shop in Nakuru to have branches across Kenya and East Africa, was forced to close down dozens of outlets from 2017 as it struggled to repay its suppliers, landlords and other creditors.

By February 2017, it had 60 branches but these had dropped to only six by September 2018.

Its sales dropped Sh1.9 billion in the year to February down from Sh51.9 billion in a similar period in 2017.

The company sought protection using Kenya’s newly-enacted company laws, which provide a path for distressed firms to avoid complete collapse.

Naivas paid Sh422 million for Nakumatt’s remaining assets, outbidding rivals Chandarana which offered Sh246 million for the six stores while Tuskys bid Sh70 million for three branches.

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