Kenyan supermarket chain, Nakumatt Holdings, will sell a 25% stake to a foreign fund for $75 million, its managing director told Reuters on Wednesday.
The transaction comes three months after the retailer admitted that it is dealing with cash flow problems and was in talks with financiers for a capital injection. The statement was in reaction to social media speculation in Uganda and Kenya about the chain’s financial health.
Read More: Nakumatt says it is facing cash flow problems, seeks financiers
Nakumatt operates 68 supermarkets in four East African countries; Kenya, Uganda, Rwanda, and Tanzania.
Atul Shah told Reuters that negotiations with the investor – as yet unnamed – are “already at final stages,” and that Nakumatt is “just waiting for the money to come.” The money is expected before the end of February, he said.
Nakumatt’s owes over $170 billion (KES18 billion) to several creditors, with most of the debt acquired to meet “ever-growing working capital and capex requirements,” according to a December credit rating by Global Credit Ratings.
Close to half of its debt, $75 million, is owed to four Kenyan banks, Shah told Reuters.
Global Credit Ratings downgraded the company’s long-term national-scale securities because of a “notable deterioration in Nakumatt’s credit risk profile,” and placed it on “rating watch.” The rapid growth in debt from KES4.7 billion at the end of financial year 2012 to its current levels have placed “unduly high pressure on the group’s gearing and liquidity position, with funding limits having largely been reached,” the agency said.
The injection from the minority equity investor “will be used to settle a large portion of outstanding short-term facilities” after which the retailer “will also embark on a process of restructuring the remaining debt facilities to longer maturities, with the additional borrowings to be used to pay long-overdue creditors,” according to Global Credit Ratings.
The rating agency was however upbeat about improvements in Nakumatt’s “core operating performance.” Though revenue might stay flat, “margins are expected to be largely upheld by greater operating efficiencies and various cost control measures undertaken,” it said.
Shah told Reuters that the transaction is being overseen by a Dubai-based advisor, whom he did not name.
