Cash-strapped Tuskys Supermarket has up to Christmas Day to reveal the identity of the mystery offshore investor seeking to buy it out or have it wound up.
High Court judge Francis Tuiyot has given the retailer 30 days from November 26 to reveal details of a restructuring plan that includes tapping a strategic investor for Sh2.1 billion and sale of Tuskys assets worth Sh911 million.
The judge said failure to make disclosures would likely trigger hearing of a liquidation suit, which could see the retailer wound up to allow creditors recoup their debt after an unsuccessful rescue attempt.
Tuskys has hinged its recovery on the assets sale, the Sh2.1 billion and restructuring of its debts to ensure staggered payment of creditors owed nearly Sh20 billion.
But the retailer has rejected a creditors’ petition in court to reveal the identity of the fund based in the Cayman Islands tax-haven amid doubts over the existence of the deal.
The creditors are also demanding a registry of the Tuskys assets targeted for sale and how proceeds from the property disposal will be used.
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Justice Tuiyot rejected Tuskys’ plea to be given one year to complete the restructuring deal, which remains a top-secret.
“The court shall adjourn the hearing of the liquidation petition filed herein for a period of 30 days to enable the court receive a report on the progress of the restructuring plan,” said Justice Tuiyot.
Tuskys has opposed the liquidation route, saying its assets would only cover 34 percent or Sh6.67 billion of the debts owed to unsecured creditors.
This indicates that Tuskys owes the unsecured creditors a total of Sh19.6 billion.
Last week, the Competition Authority of Kenya (CAK) said Tuskys went quiet and failed to reveal the identity of the offshore investor more than 16 months after the retailer announced a financing deal.
The authority had in July last year said it would decide within two weeks on any investment proposal by the retailer, accelerating a process that usually takes months.
“They came and told us they were getting a strategic investor and I never saw them again,” Wang’ombe Kariuki, the director-general of the CAK, told the Business Daily in an interview.
“But at least in terms of our intervention we were able to recover above Sh2.5 billion for about 250 suppliers and I can say this is not the same situation that happened during Nakumatt.”
Nakumatt, which grew from a mattress shop in Nakuru to have branches across East Africa, was forced to shut down last year as it struggled to repay its suppliers, landlords and other creditors.
Tuskys was ordered by the competition watchdog to clear supplier bills worth Sh2.77 billion in June last year under new rules to cushion suppliers from delays.
Creditors led by electronics firm Hotpoint Appliances have petitioned Tuskys in court to reveal the identity of the financier, suggesting the retailer is using the Sh2.1 billion deal to delay a suit where more than 60 creditors are pushing for its liquidation over unpaid supplies.
They are also seeking details of the loan agreement, including interest rate, repayment period and whether or not it is secured.
The retailer’s opposition to naming the offshore fund emerged in the suit where the creditors led by Hotpoint Appliances are pushing for liquidation of the supermarket chain over a Sh1.02 billion debt.
Tuskys’ total debts, including bank loans, are in excess of Sh10 billion and lenders have cut fresh credit lines.
Since announcing the Sh2.1 billion deal, Tuskys has been losing employees, stores, customers and suppliers as its cash troubles worsened.
Tuskys, until recently Kenya’s top retailer with 53 stores, has less than 10 outlets operating amid stock-outs. At its peak, the retailer was an acquisition target for global giants seeking a foothold in East Africa such as Walmart.
The investor intending to provide Tuskys with the Sh2 billion loan sought to secure the debt using all of the supermarket operator’s shares, putting the ownership of the existing shareholders at risk in the event of default.
The unnamed investor, based in the tax-haven Cayman Islands, was ready to disburse the funds but demanded Tuskys’ shareholders approve the deal, including committing the shares.
This forced Tusker Mattresses Limited, the owner of the Tuskys brand, to summon a shareholder meeting in September last year to approve the use of the shares as security for the debt.