Kenya

Nakumatt applies for voluntary administration as insolvency loom

Kenya, October 31st – The directors of Nakumatt Holdings Limited (“Nakumatt”) have applied to the High Court for an administration order in accordance with section 532(1)(b) of the Insolvency Act (2015).

Nakumatt has proposed that PKF Consulting Limited’s Peter Kahi be appointed as administrator.

Kahi is the partner in charge of PKF’s forensic and business recovery services in East Africa, an experienced business turnaround professional.

If the application applied on Monday is granted, he will act as an independent administrator and perform his functions in the interests of Nakumatt’s creditors as a whole.

Hon. Justice Joseph Onguto of the High Court has ordered that the application for administration be heard on November 8, 2017.

Nakumatt directors are optimistic that the court will make the administration order in favour of the retailer, to enable it  achieve a better outcome for its creditor, which could fail to be achieved if the company is liquidated.

Appointing an administrator will enable Nakumatt continue to trade and generate revenue to meet its ongoing financial obligations, the firm has said.

“Continued trading of the company will provide an opportunity for the business to reassess its financial position and options for restructuring and the time to implement a business turnaround,” the retailer said in a press statement on Monday evening.

“Importantly, pursuant to section 560 of the Act, while a company is under administration, there is a moratorium on certain legal processes, including a moratorium against enforcement of security over the company’s property or the exercise of a right of forfeiture by peaceable re-entry, without the consent of the administrator or the approval of the court,” it added.

The retailer said senior lenders are aware of its financial position and are supportive of Nakumatt’s application for an administration order.

Further, Tusker Mattresses Limited (Tuskys) has, subject to the Competition Authority of  Kenya’s approval, undertaken to forge ahead with its investment in Nakumatt in connection with its proposed merger with the troubled retailer.

According to Nakumatt, the decision to apply for an administration order was a difficult and complex one that was carefully considered by the retailer and its advisors.

It has expressed fears that in the absence of an administration order, there is a significant danger of it being wound up with the inevitable consequence that the company, its employees, lenders, landlords and suppliers would suffer significant losses.

The move will also affect thousands of farmers, small businesses and traders whose livelihoods are dependent on the business.

“Notwithstanding the current state of the business operations, Nakumatt still believes that it has a strong underlying sustainable core business that is capable of a turnaround with the support of all stakeholders,” it said.

Nakumatt considers that administration provides it with the best opportunity to effectively restructure its business.

“To the extent an administration order is issued by the court or there are further developments, we commit to provide progress updates as necessary. In the interim, we would like to thank our staff, customers, suppliers and other stakeholders for their patience and continued support,” the retailer said.

The family-owned business has been fighting to cut back on massive debts owed to suppliers estimated at Sh15 billion as at February 2015, a situation that has been pilling pressure on its operations.

In May, Nakumatt publicly announced plans to close its poorly performing branches in Kenya and Uganda as part of cost-cutting measures aimed at saving the retailer Sh1.5 billion annually,a move that has seen at least five branches  in Nairobi shut in the last four months.

They include Thika Road Mall (TRM) branch, its outlet at the NextGen Mall on Mombasa Road, Haile Selassie branch located at the Kenyatta University Plaza, Ronald Ngala branch and the Westgate branch.

The Westgate branch, which opened in 2009, had been shut in 2013 after a terrorist attack on the Westgate Mall located in Nairobi’s Westlands, which left at least 67 people dead and billions of shillings lost by businesses.

The retailer has also closed a branch in Uganda that had accumulated rent arrears estimated at about Sh8.5 million.

The cash-strapped retailer which had 65 stores across Kenya, Uganda, Rwanda and Tanzania as of December 2015, has rent arrears estimated at more than Sh1 billion.

By Martin Mwita

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