Uchumi Supermarkets has written Sh240 million worth of cheques to its suppliers for May and June deliveries in a show of the retailer’s bid to avoid piling up new debt.
The group Thursday received their first batch of cheques through jointly operated accounts opened since the agreement was signed to bank cash received from goods sold.
Close to 170 suppliers agreed to resume furnishing its shelves with goods under an arrangement that gives them control over how they get paid.
“We are calling on more suppliers to bring back their goods as we sort things out. We hope to triple the payments through the escrow account this month,” Uchumi chief executive Julius Kipngetich said Thursday at the chain’s Ngong Hyper outlet.
The escrow accounts were opened at the Kenya Commercial Bank (KCB), Jamii Bora Bank and United Bank for Africa-Kenya (UBA).
The friendly suppliers on May 20 adopted a deed of settlement by which they were to resume supply of goods as long as the sales were deposited in an escrow account controlled by a suppliers’ council.
Under the arrangement, Uchumi is getting 20 per cent of the revenues to pay rent, rates and staff costs and make a profit margin while the suppliers get 80 per cent of the cash.
Mr Kipngetich said the deed would remain in force until the supermarket chain gets back on its feet.
The council also adopted a charter for indoor management to ring fence the suppliers’ goods in case Uchumi is liquidated to give confidence to more suppliers to come on board.
The accounts would also hold proceeds from the disposed assets to settle the old debt of up to Sh3.6 billion.
KCB which holds the charge to Ngong Hyper supermarket that Uchumi sold at Sh1.4 billion is holding Sh400 million from the first tranche of the sale. The lender is owed Sh900 million.
Mr Kipngetich also said that sale of Uchumi’s Kasarani land “was in the final stages.”
Uchumi is also trying to convert part of the old supplier debt into equity and get a government bailout.
Mr Kipngetich said the next tranche is expected “in a matter of weeks,” which will allow them to further reduce their debt.