Struggling retailer Nakumatt Holdings has applied for voluntary administration at the High Court, a move aimed at giving it breathing space to structure a deal to sell a majority stake in the company as part of its recovery plan.
Nakumatt, which has been under serious financial burden for over a year, is banking on the administration order to buy time to put in place a restructuring plan while assessing its current financial position.
“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,” reads a statement from Nakumatt to newsrooms.
The administration order is in line with with section 532(1)(b) of the Insolvency Act (2015) (“Act”), with Nakumatt aiming to avoid being wound up to clear debts with suppliers and creditors.
“The Nakumatt directors are optimistic that the Court will make the administration order in relation to Nakumatt as the order will enable Nakumatt achieve a better outcome for its creditors as a whole than would likely be the case if the company were liquidated,” the retailer said.
Nakumatt has proposed that Peter Kahi of PKF Consulting be appointed as administrator.
“Mr Kahi is an experienced business turnaround professional and if the application is granted, he will act as an independent administrator and perform his functions in the interests of Nakumatt’s creditors as a whole,” the retailer said.
Nakumatt owes creditors an estimated Sh30 billion with supplies also lining up seeking payment for goods delivered.
Nakumatt has entered formal talks with its major creditors seeking to halt interest payments on loans as it restructures the business and awaits the entry of a new majority owner.
In the proposed deal, Tuskys will acquire up to 51 percent of Nakumatt Holdings, coming in with a new management team to steer its recovery.
The retailers have already forwarded the acquisition request to the Competition Authority of Kenya (CAK) for approval.
“Tusker Mattresses Limited 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,” Nakumatt affirmed.
The application of the administrative order will be heard on November 8.