NAIROBI, Kenya, Dec 1 – Embattled retailer Nakumatt has attributed part of its problems to the year-old Banking (Amendment) Act which put a cap on interest rates.
Nakumatt chief executive Atul Shah has in court papers said that the enactment of this law severely restricted the supermarket’s ability to access crucial short to medium terms financing that it relied upon to meet its obligations to its creditors.
“It therefore became necessary for Nakumatt to negotiate fresh terms with financial institutions and repayment with its creditors owing to these unforeseen circumstances,” Mr Shah in court papers.
Shah says the discussion with the financial institutions has taken longer than anticipated, “but Nakumatt has made a lot of effort to recapitalize the business so as to overcome the current financial situation.”
There are currently two insolvency petitions filed against Nakumatt by its creditors. The High Court in August, issued orders stopping all Nakumatt creditors from attaching its property to recover amounts owed to them.
However, on November 16, a request by Nakumatt Supermarkets to be allowed to appoint an administrator to run its affairs until it is able to resume normal business, was declined.
Consequently, two of its creditors – Sabaki River Holdings Ltd, and Southcoast Holdings Ltd – entered the premises in Malindi that they had leased to Nakumatt and placed notices stating the lease had been terminated.
Mr. Shah wants the creditors stopped because they have violated the August 28, court order as well as the provisions of the Insolvency Act.
“I believe the November 16 ruling did not vacate the earlier orders issued on August 28, restraining any acts of attachment, sequestration, distress or execution against Nakumatt and its assets,” said Shah.
He added that Sabaki and Southcoast, have completely denied Nakumatt access to the premises and as such there is a high likelihood that if the premises are not re-opened, perishable goods contained in them such as vegetables, dairy products, meat products and juices will get spoilt and may contaminate all other goods in the store.
“If the premises are not re-opened, Nakumatt’s efforts to restructure and refinance its business will be frustrated. Nakumatt is currently engaged in discussions with financiers designed to recapitalize its business and thereby enable it meet all its outstanding obligations.”
Sabaki River Holdings Ltd, and Southcoast Holdings Ltd, through their lawyer Philip Mwoka and Sultan Khimji have opposed the application saying that Nakumatt is a tenant at the two premises and has defaulted on the terms of the lease. Nakumatt owes Sh26,140,692 and Sh6,777,476 to the two firms, respectively, in rent arrears.
Mr Khimji said Sabaki and Southcoast have, in compliance with the terms of the lease agreement, repossessed the premises and terminated the lease agreement.
He also said the high court has not issued any order directed to landlords restraining them from exercising a right to take back their premises.
“Nakumatt is treating us inequitably as it has been making payments to certain malls (landlords),” Mr Khimji said in court papers. He said they are also servicing mortgages and which they have been unable to service because Nakumatt has failed to pay its rent.
They have asked the court to allow them take over their premises as provided in the lease agreements they had entered with Nakumatt.
The case will be heard on December 4.