Kenya's Largest Retailer Nakumatt to Enter Administration

(Bloomberg) -- Nakumatt Holdings Ltd., East Africa’s largest retailer, is seeking a court order to enter administration as part of a plan to revive its debt-laden business.

The Kenyan company will go to court on Nov. 8 for a hearing on the application, which proposes that “business-turnaround professional” Peter Kahi of PKF Consulting Ltd. be appointed as administrator, according to a statement emailed Monday from the capital, Nairobi. Nakumatt is “optimistic” that the order will be granted, as it will enable the company to continue as a going concern, it said.

“The order will enable Nakumatt to achieve a better outcome for its creditors as a whole than would likely be the case if the company were liquidated,” the company said, according to the statement.

Nakumatt has been struggling to pay suppliers and owes at least 30 billion shillings ($289 million) to creditors including KCB Group, Kenya’s largest lender, along with Standard Chartered Bank Kenya Ltd. and Diamond Trust Bank Kenya Ltd. The debts, which include commercial-paper loans, have forced the company to shutter branches in neighboring Uganda and Tanzania, as well as its home market of Kenya.

Chief Executive Officer Atul Shah, whose family controls the Nairobi-based company, said last month he was in talks with local rival Tusker Mattresses Ltd., which trades as Tuskys, about a merger. Those talks are continuing, the company said Monday.

‘Forge Ahead’

“Tusker Mattresses 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,” according to the statement.

The anti-trust authority has yet to receive any filings from the two companies on the proposed merger, Director-General Wang’ombe Kariuki said by phone on Tuesday.

“They only made an enquiry seeking guidance on how to proceed,” he said. “Whether it’s a management agreement, merger or acquisition they need to seek an exemption or approval.”

Tuskys is willing to guarantee as much as 3 billion shillings of debt and provide 650 million shillings in additional capital to Nakumatt, the Nairobi-based Business Daily newspaper reported on Tuesday, citing an offer letter by the smaller rival.

Growing Competition

Nakumatt had 63 stores in four East African nations at the end of 2016. Shoprite Holdings Ltd. of South Africa is already in talks about opening its first stores in Kenya by filling space left empty by the Nakumatt store closures. Carrefour SA of France, run by franchise holder Majid Al Futtaim Holding LLC, has also taken up one store in Nairobi.

Administration would protect Nakumatt against the enforcement of security over the company’s property or right of re-entry by landlords, it said.

“Nakumatt is apprehensive 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, with a broader impact on thousands of farmers, small businesses and traders whose livelihoods are dependent on the business,” according to the statement.

To contact the reporter on this story: David Herbling in Nairobi at dherbling@bloomberg.net.

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Helen Nyambura, John Bowker

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