Uchumi Supermarket Plc will convert 50 per cent of Sh9.6 billion debt owed to creditors into preferential shares and write off others in a revised deal as it kicks off turnaround plans under the watch of an insolvency practitioner.

Although trade creditors, made up of suppliers and landlords, will be the hardest hit by the write-off, they will take the biggest shares amounting to 2.4 million converted from their outstanding Sh4.8 billion dues.
The debt-equity swap will leave Co-operative Bank, which has already offered a 40 per cent waiver on interest and penalties, with 161.5 million shares courtesy of the defaulted Sh323 million loan.

United Bank for Africa (UBA) Kenya is set to have 80.8 million shares while other shares will go to pension schemes and other payables. KCB Bank and Kenya Development Corporation (KDC) also gave an interest and penalty waiver of 44 per cent and 40 per cent, respectively.

Government-affiliated entities like KCB, KDC, National Treasury, and Kenya Revenue Authority have been exempted from taking the switch. The four entities are owed a total of Sh3.25 billion, with Uchumi considering a long-term repayment plan starting in 2026 to spread the burden.

“The company recommends that after the two payments are made and conversion of 50 per cent of debt into convertible preferential shares, all other outstanding balances as at June 30, 2022 be written off by the creditors,” Uchumi Supermarket chairman John Kairani told creditors yesterday.

As such, the beleaguered retailer will only use about Sh1.98 billion, which will be proceeds from the anticipated sale of key assets, to pay creditors before the remaining debts are scrapped off, leaving unsecured creditors like suppliers with a hit.

The sale of Uchumi’s prime assets – a combined 20-acre piece of land located in Kasarani – is expected to generate a Sh2.35 billion fund despite the assets being locked in an unending court battle with the Kenya Defence Forces (KDF). KDF is claiming ownership of the land. Uchumi, whose stock prices on the Nairobi Securities Exchange (NSE) have plummeted to a low of Sh0.18 per share from a high of Sh24 per unit during the heydays, now wants an out-of-court settlement within 24 months with the parties involved in the disputed land.

Out of the Sh2.35 billion anticipated proceeds, Uchumi will only use 15.86 per cent or Sh370 million to finance its internal operations while the remaining Sh1.98 billion will be distributed among creditors at an already agreed sharing ratio.

Trade creditors and KCB will take the biggest share of the proceeds, at 30.71 per cent and 24.67 per cent respectively. Another 8.85 per cent will go to staff dues as pension takes a 7.64 per cent cut.
The split of the converted shares and proceeds of the assets sold are contained in the Company Voluntary Agreement (CVA) revised yesterday.

“I have examined the above plan, which includes a revision of the current CVA, speciality looking at the sale of the property owned by Kasarani Mall Limited (a subsidiary of Uchumi supermarket), and other properties and any other idle assets the company may possess,” said Owen Koimburi, the supervisor of the CVA from Mazars Consulting Ltd, the legally appointed insolvency practitioner.