End of an era for Nakumatt as creditors dissolve giant retailer

It was end of an era as giant retailer Nakumatt as creditors voted to liquidate the company in a move that will see a majority of them walk home empty handed after the liquidation exercise.

Creditors yesterday made the final call on the retailer which was once East Africa’s biggest supermarket chain opting to pursue the directors directly for the cash.

“Most of the voting papers I have seen recommend we pursue the directors to recover the money lost,” said Peter Kahi, the Nakumatt Administrator.

The creditors complained that they had no choice but to approve the liquidation considering that the administrator had already sold Nakumatt assets, from the six branches that remained after collapse to Naivas Supermarkets at Sh422.5 million.

Once the liquidators step in, it will signal the imminent end of the regional retail behemoth which has been under voluntary administration since January 2018 over failure to pay Sh38 billion debt owed to creditors.

The retailer’s revenues had soared by 2017 to hit Sh52 billion from Sh40.4 billion the previous year, boasting 62 branches with over 6,000 employees at its peak.

However, the turnover later dipped by 96 per cent to hit Sh1.9 billion by 2018, to none by the close of last year.

The liquidator will dispose off Nakumatt headquarters, pursue remaining cases in court amounting to about Sh2 billion, and then pursue the company directors to recover Sh1 billion loan owed to the retailer.

During the meeting at Visa Oshwal Centre yesterday, 141 creditors who accounted for 92 per cent of the 169 present agreed to the proposal by the administrator to liquidate Nakumatt.

Only 28 creditors opposed the deal. The weight of the vote depended on the value of claim owed as opposed to the number of voters.

Of the 141 who supported liquidation, 93 voted with a claim value of Sh11.5 billion supporting the liquidation proposal without modifications, while 48 creditors with a claim value of Sh3.7 billion supported it with modifications. The 28 creditors who opposed liquidation had a claim value of Sh1.1 billion.

This was the second meeting for the creditors after the first one in March 2019 ended without voting.

Kahi said most of the creditors, especially the unsecured ones stood no chance of recovering their money as they came last in sharing the Sh422.5 million recovered from the collapsed retailer.

Preferential creditors

“We will first pay administration costs, followed by preferential creditors (KRA NSSF, land rates) then secured creditors (banks) and if anything remains we will pay the unsecured creditors,” he said.

Administration costs will include all debts incurred during the administration period as well as the administrator’s fee.

Nakumatt owes suppliers, unsecured creditors, about Sh18 billion, KRA Sh2.1 billion, NSSF Sh78 million and Sh400 million in staff arrears. It also owes Diamond Trust Bank Sh3.6 billion, KCB (Sh1.9 billion), Bank of Africa Sh328 million and United Bank of Africa Sh126 million.

Creditors could still recover 46 per cent of the money lost from KRA, 30 per cent as income tax returns and 16 per cent as value added tax (VAT). However, creditors holding commercial papers amounting to Sh4 billion stand no chance of recovering any of the amount as they do not qualify for returns from the taxman.

Kihi said Nakumatt had no branches or assets hence could not borrow from banks for resuscitation. He revealed that the retailer relied on a very weak business model, akin to a pyramid scheme, banking on only its brand name to secure cash and inventory from suppliers. 

“It’s impossible to turn around a retailer without branches. Turning around a company with Sh38 billion debt is next to impossible. It is impossible to attract investors with that balance sheet,” he said.