Nakumatt recovery mechanism on top gear

Tusker Mattresses Chairman Stephen Mukuha (centre) flanked by PKF Partner and Nakumatt Adminstrator Peter Kahi (left) and PKF Managing Director Atul Shah

The ongoing efforts to provide a recovery mechanism for distressed retailer Nakumatt Holdings, have gained momentum with key suppliers pledging to support the recent appointment of an Administrator.

While addressing a meeting convened to update Nakumatt’s suppliers on the ongoing developments, the Nakumatt Holdings (under Administration) Administrator Mr. Peter Kahi confirmed that ongoing plans to maintain the business through a supplier partnership model are now on course.

As part of the business recovery plan, and ahead of the formal initial creditor meeting, Kahi has implored the retailers’ suppliers and shoppers to continue providing their support, as efforts to formulate a rescue plan get under way.

Speaking at the meeting in Nairobi, Mr. Kahi assisted by business consultancy firm PKF CEO, Mr. Atul Shah said preliminary studies confirmed a good chance of business growth for Nakumatt.

The chance of growth, the Administrator explained, will however be anchored by renewed support from Nakumatt suppliers, shoppers and other stakeholders including staff members.

With the suppliers’ support, Kahi confirmed that plans to restock up to 20 Nakumatt branches by next month had been drawn up. Such restocking, he noted will provide an avenue to grow customer traffic in the branches and much needed revenue.

“The chance of recovery for Nakumatt is fair and can be accelerated by the support of specific stakeholders such as suppliers to fuel its engine,” Kahi said, adding that, “the new legal frameworks provide a good platform for the administrator to work for the benefit of all creditors.”

At the same meeting, Kenya Association of Manufacturers (KAM) Chairperson, Florah Mutahi stressed the need to beef up governance frameworks for the retail sector.

The manufacturing sector, she confirmed would continue to extend its support to the retailers who provide a complementary market for manufactured goods.

“However, it is important for retailers to adopt contemporary governance principles that can help avert the current challenges facing the local market,” She stressed.

As part of the recovery plans, the Nakumatt Holdings (under administration) Administrator recently announced the appointment of Tusker Mattresses Limited as the new Managers for the regional retailer.

The appointment, subject to regulatory approvals earlier sought and will see Tusker Mattresses Ltd assuming the operations management aspects for Nakumatt as the firm’s recovery efforts gain steam.

With the appointment, Tusker Mattresses will provide strategic management support and related retail operations back up to the Administrator under stringent performance terms and conditions.

“The success of the administration process, and ultimately turnaround of Nakumatt business, will be hinged on, among others, strategic retail stores management which we believe will be achieved through the appointment of Tusker Mattresses as an operating Manager,” Kahi said.

As an operating manager, Tusker Mattresses will provide specific technical services geared at avoiding further erosion on Nakumatt’s operating units.

The administration order in relation to Nakumatt will enable the firm achieve a better outcome for its creditors as a whole than would likely be the case if the company were to be liquidated, principally because:

  • the administration will enable Nakumatt to be maintained as a going concern.  Nakumatt shall continue to trade and generate revenue to meet its ongoing financial obligations; and
  • the administration and continued trading of the Company will provide an opportunity for the business to reassess its financial position and options for restructuring and the time to implement a business turnaround.  Importantly, pursuant to section 560 of the Act, while a company is under administration, there is a moratorium on certain legal processes, including a moratorium against enforcement of security over the company’s property or the exercise of a right of forfeiture by peaceable re-entry, without the consent of the administrator or the approval of the Court.

Last year, Nakumatt management had expressed apprehension that in the absence of an administration order, there would have been a significant danger of the firm being wound up with, its employees, lenders, landlords and suppliers standing to suffer significant losses, with a broader impact on thousands of farmers, small businesses and traders whose livelihoods are dependent on the business.

Notwithstanding the current state of the business operations, Nakumatt still believes that it has a strong underlying sustainable core business that is capable of a turnaround with the support of all stakeholders. Nakumatt considers that administration provides it with the best opportunity to effectively restructure its business.