Uchumi’s 12th hour just got closer after it was declared that it’s Taj Mall branch stock and equipment will be sold on May 18 at the fall of the auctioneer’s hammer to recover Sh50 million rent arrears accumulated over 10 months.
The action, will upon effect add onto the series of debt recovery efforts that have occurred in recent months with the risk of pushing the retailer closer to its demise.
Taj Mall Monday appointed Moran Auctioneers as bailiffs to recover the Sh50 million in rent arrears through the sale of a cache of confiscated goods at the outlet, which was closed in March.
“We have given them (Uchumi) payment options but they claim that they do not have money. We are left with no option but to auction the property,” said Ramesh Gorasia, who is one of the Taj Mall owners.
Uchumi — which was placed under statutory management between 2006 and 2011 — has in recent times been hit by a barrage of claims from suppliers and creditors it owes close to Sh6 billion in Kenya, Uganda and Tanzania.
The loss-making supermarkets chain is currently battling a winding-up suit in Kenya and was in January forced to file for bankruptcy in Kampala where it failed to service debts after shutting down operations.
Talks of a government bailout emerged last week, bringing into sharp focus the tenure of Jonathan Ciano, the former chief executive who helped get Uchumi out of the 2006 receivership but has since his removal from office last year been accused of cooking books to paint a rosy picture of the retailer’s finances.
Taj Mall’s seizure of Uchumi’s inventory adds to the woes of Kenya’s oldest retail chain, which for the second time in a decade is being choked by unpaid suppliers’ dues and mounting debts.
Uchumi has historically been grappling with suppliers’ dues and mounting debts, which caused the listed retailer to be declared insolvent on May 30, 2006 and subsequent suspension from trading at the Nairobi bourse — and was only readmitted on May 31, 2011. Uchumi’s position has more recently been made more difficult by the fact that it has been forced to rely on asset sales and costly bank loans for working capital, as it buys time to get a strategic investor to inject Sh5 billion into the business in exchange for a majority stake.
Analysts at Cytonn Investments said Uchumi will continue to struggle to operate due to cash flow problems to fund daily operations.“Uchumi will need to raise more capital to remain operational in a competitive retail environment,” said Cytonn in a research note.
The Taj Mall-Uchumi tiff mirrors the battle in Uganda where Golf Course Holdings, the landlord at Garden City Mall where Uchumi had a shop, has locked up the premises and denied the retailer access to the residual stock held there at the time of closure.
Mr Gorasia revealed that Uchumi had defaulted on rent payments since September last year, offering a rare peek into the financial troubles at the listed supermarkets chain.
The list of goods confiscated from Uchumi and are up for auction includes 4,200 tissue papers, 605 cans of Mortein Doom, 129 pieces of Imperial Leather soap, 1,238 packets of Aquafresh toothpaste, 55 units of Del Monte juice, and 176 cans of Tusker beer.
Others are 930 bundles of hair weave, three StarTimes aerials, 63 Keringet water bottles, 164 containers of Blue Band margarine, 36 Kasuku exercise books, 18 pieces of Java coffee, 240 packets of Kericho Gold tea, and 145 bottles of Elianto cooking oil.
It was not immediately clear if landlords at the other four outlets Uchumi closed — Embu, Eldoret, Nakuru and Kisii — have also attached the retailer’s goods to recover unpaid rent.
The closure of the five shops leaves Uchumi with 20 outlets in Kenya.
Uchumi has been sued by five suppliers who want it wound up over delays in settling debt. The suppliers in court for their dues are Ceccagnoli Italiano Ltd, Kenblest Group, Githunguri Dairy, StarTimes and Nairobi Bottlers — who are claiming a combined Sh315 million from Uchumi. The retailer owes suppliers Sh3.6 billion and another Sh2.5 billion in debt is held by banks with charged assets.
A forensic audit into the books of Uchumi by KPMG found that the former management led by Mr Ciano, Chadwick Omondi Okumu (chief finance officer), and David Mboya (internal auditor) had cooked books and concealed losses for a period of three years.
The retailer has hired Pamoja Capital to help guide the search for a deep-pocketed investor to put in up to Sh5 billion in exchange for a controlling stake.
Plans to dispose of properties such as the Ngong Road and Lang’ata Hyper store and a 20-acre plot in Kasarani have hit strong headwinds in the form of legal suits arising from contested ownerships and low offers from interested bidders.