Tuskys has 30 days to reveal his secret investor

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Tuskys has 30 days to reveal his secret investor


Tuskys Wareng Supermarket in Eldoret Town, Uasin Gishu County, September 10, 2020. PHOTO | JARED NYATAYA | NMG

Summary

  • High Court Judge Francis Tuiyot gave the retailer 30 days from November 26 to reveal details of a restructuring plan that includes the appeal of a strategic investor for 2.1 billion shillings and the sale of the Tuskys assets worth 911 million shillings.
  • The judge said the failure to disclose would likely trigger a liquidation lawsuit hearing, which could result in the retailer going into liquidation.
  • Tuskys opposed the liquidation route, saying its assets would only cover 34% or 6.67 billion shillings of debts owed to unsecured creditors.

Cash-strapped Tuskys supermarket has until Christmas Day to reveal the identity of the mysterious offshore investor seeking to buy it out or liquidate it.

High Court Judge Francis Tuiyot gave the retailer 30 days from November 26 to reveal details of a restructuring plan that includes the appeal of a strategic investor for 2.1 billion shillings and the sale of the Tuskys assets worth 911 million shillings.

The judge said the failure to disclose would likely trigger the hearing of liquidation proceedings, which could result in the retailer’s liquidation to allow creditors to recover their debt after an unsuccessful bailout attempt.

Tuskys based its recovery on the sale of assets, the 2.1 billion shillings and the restructuring of its debts to secure the installment payment of creditors owed nearly 20 billion shillings.

But the retailer has rejected a request by creditors in court to reveal the identity of the Cayman Islands-based tax haven fund, amid doubts over the deal’s existence.

Creditors also demand a record of Tusky’s assets held for sale and how the proceeds from the sale of the property will be used.

Judge Tuiyot has dismissed Tuskys’ request for a year to complete the restructuring deal, which remains top secret.

“The court will adjourn the hearing of the liquidation petition filed here for a period of 30 days to allow the court to receive a progress report on the restructuring plan,” Judge Tuiyot said.

Tuskys opposed the liquidation route, saying its assets would only cover 34% or 6.67 billion shillings of debts owed to unsecured creditors.

This indicates that Tuskys owes unsecured creditors a total of Sh19.6 billion.

Last week, the Kenya Competition Authority (CAK) said Tuskys had been silent and had not disclosed the identity of the offshore investor more than 16 months after the retailer announced a deal to funding.

The authority announced in July last year that it would take a decision within two weeks on any investment proposal from the retailer, speeding up a process that typically takes months.

“They came to tell us that they were looking for a strategic investor and I never saw them again,” said Wang’ombe Kariuki, CAK’s general manager. Daily business in an interview.

“But at least in terms of intervention, we were able to recover over 2.5 billion shillings for around 250 suppliers and I can say that this is not the same situation that happened during Nakumatt.”

Nakumatt, which has grown from a mattress store in Nakuru to branches across East Africa, was forced to close last year as it struggled to repay suppliers, owners and other creditors.

Tuskys was ordered by the competition watchdog to clear supplier invoices worth 2.77 billion shillings in June last year under new rules to protect suppliers against delays.

Creditors led by electronics firm Hotpoint Appliances have asked Tuskys in court to reveal the identity of the financier, suggesting the retailer is using the 2.1 billion shillings deal to delay a lawsuit where more than 60 creditors request its liquidation for unpaid supplies.

They also research details of the loan agreement including the interest rate, repayment period, and whether or not it is secured.

The retailer’s opposition to naming the fund offshore emerged in the lawsuit where creditors led by Hotpoint Appliances are pushing to liquidate the supermarket chain on a debt of 1.02 billion shillings.

Tusky’s total debts, including bank loans, exceed 10 billion shillings, and lenders have cut new lines of credit.

Since announcing the 2.1 billion shillings deal, Tuskys has lost employees, stores, customers and suppliers as its cash flow problems worsened.

Tuskys, until recently Kenya’s largest retailer with 53 stores, has fewer than 10 outlets while they are out of stock. In its heyday, the retailer was an acquisition target for global giants seeking a foothold in East Africa like Walmart.

The investor intending to provide Tuskys with the 2 billion shillings loan sought to secure the debt using all the stock of the supermarket operator, endangering the property of existing shareholders in the event of default.

The anonymous investor, based in the Cayman Islands, a tax haven, was prepared to disburse the funds but asked Tuskys shareholders to approve the deal, including the pledge of the shares.

This forced Tusker Matttresses Limited, owner of the Tuskys brand, to call a shareholders’ meeting in September last year to approve the use of the shares as collateral for the debt.

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