Nakumatt has presented a new supplier partnership model in which creditors would be able to swap debt for equity in the retailer.

Ailing Kenyan retailer Nakumatt made a bold proposal to debt-owner suppliers in which the latter would be able to swap credit for equity in the retailer. The offer was made during a meeting in Nairobi conducted by recently appointed administrator Peter Kahi.

Suppliers were not convinced by the proposal with some out rightly rejecting it. Talking for the first time with suppliers and in the first meeting since the retailer officially went into administration following a petition authored by four suppliers, Mr. Kahi clarified that this proposal would be the first of many options to be presented before creditors. Any potential solution would, however, have to be accepted by at least 75% of suppliers in terms of debt value.

Nakumatt’s new administration also announced the adoption of short-term measures aimed at bringing the retailer closer to a recovery path. According to Mr. Kahi, there is already a plan to restock the remaining branches in order to drive traffic back to stores. Nakumatt will also adopt a consignment sales model according to which, if products are not sold, they can be taken back by suppliers. If stocks are sold, the retailer guarantees payment in 7 to 14 days.

This is a significant departure from the payment scheme suppliers were subjected to before Nakumatt’s financial problems became publicly known and is in line with the regulatory framework suppliers’ associations and others in Kenya have pressured the government on. In fact, much of the crisis the retailer is going through can be attributed to a debt-driven expansion strategy.