Shareholders Seal Uchumi Deal

By Godfrey Tung'wet Posted 22 July 2006 @ 09:14 pm EET     Print     Reprint     E-Mail     Comments

NAIROBI (IBTimes.com) - Shareholders of Uchumi Supermarkets have found a way to raise $4.2 million for the retail chain’s working capital.

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The deal crafted in a four-hour meeting at Kenyatta International Conference Centre in Nairobi yesterday will enable the company to raise over $13.5 million after the Government earlier put in $9.375 million with the shareholders expected to bridge the difference.

The shareholders will lend the company a minimum of Sh10,000 each and in multiples of Sh5,000 thereafter. They will then become debenture holders, which means they are secured creditors and cannot lose their money even if the company were to close again.

According to the agreement, the debt payments will be released every three months and pegged to the 91-day Treasury bill interest rate.

This is the same rate at which the Government's $9.375 million loan is pegged. It means that the interest rate will keep on changing in line with rates charged on the T-bill.

But the shareholders rejected an earlier proposal of $1388.89 as the minimum contribution which was seen as too high for many of them.

Amana Capital and Suntra Investment Bank had also proposed that after the minimum amount, a shareholder should put in money in multiples of $694.45.

The shareholders who will qualify for the loan stock are those registered by May 31, this year.

Investors who are not already shareholders but would wish to support the rescue plan could also put in their application although preference will be given to the existing shareholders.

If the offer does not manage to raise over $4.2 million, the minimum required under the programme, other investors who had earlier expressed interest could be asked to come on board and make a contribution as debenture holders.

One of the Uchumi Supermarkets Hyper landlords had agreed to reduce rent by 50 per cent. Another had agreed not charge for six months and charge 75 per cent thereafter.

For suppliers, they had agreed to covert 25 per cent of their debt into equity, 25 per cent of the debt would be paid after three months and another 25 per cent would be settled in nine months.