Kenya: The U.S.$0.3 Million Debt That Threatens to Wind Up Tuskys

Tuskys, Kenya's largest supermarket chain by footprint, is facing a litmus test as it prepares to fight back a court battle that could see it wound up.

Syndicate Agencies Ltd, a loss control and risk management company, has filed a petition claiming that Tuskys has failed to settle a Ksh30.8 million ($308, 000) debt that has accumulated over three years.

The company, in court papers filed on August 12, says it has done a thorough search and established that there is no cash in any of the Tuskys' bank accounts and that no financial institution holds money on behalf of the retailer. It has invited other creditors to join in the suit.

Tuskys hired Syndicate Agencies on November 10, 2017, to beef up security and help cut losses from shoplifting and theft by employees.

Syndicate also brought in personnel to view CCTV feeds in Tuskys' branches, conduct shop patrols, double-checkers, individuals to inspect staff as they entered and exited work, and system controllers.

Initially, the contract was to run for two years and terminate in November, 2019, but the parties agreed to extend the deal to May 2020.

All the personnel were to be paid by Syndicate, which was to add the salary costs to the contract price.

Syndicate is owned by Charles Okech Njeli, Joseph Mangi Kiluma and Alphaeus Itimo Mutuku, who each own 333 shares in the company.

Mr Njeli and Mr Kiluma are businessmen while Mr Mutuku's Linkedin page states that he is Tuskys' security manager, an indication that he was seconded to the retail chain by Syndicate Agencies.

The company was to install CCTV cameras and plant undercover agents in Tuskys branches, who were to assist in avoiding leakages at the retail chain.

Last week, Syndicate Agencies invited creditors to join the petition, a move that will enable the High Court t0 decide whether to let Tuskys operate or appoint a liquidator to sell its assets and settle its mounting debts.

"The said company (Tusker Mattresses Ltd) is truly indebted to the petitioner herein Syndicate Agencies in the aggregate ofKsh30.8 million. The company (Tuskys) is unable or has no reasonable prospect of paying the debt," Syndicate Agencies says in court filings.

"The company (Tuskys) is insolvent and unable to pay its debts. In the circumstances, it is just and equitable that the company should be wound up," Syndicate adds.

The notice asking creditors to join the insolvency petition was published on the same day that Tuskys announced that it had secured a Ksh2 billion ($20 million) working capital injection from a Mauritian company.

The retailer has, however, remained tight-lipped on the identity of the lender despite several media queries.

Tuskys has admitted to the Competition Authority of Kenya that it owes suppliers Ksh6.2 billion ($62 million), but has struck a deal to repay Ksh2.4 billion ($24 million)in installments over the next two years.

The competition watchdog set up a Buyer Power department in 2018 to shield company creditors after Nakumatt Supermarkets went under with over Ksh35 billion ($35 million) owed to various companies and individuals.

The department has waded into Tuskys' troubles, and in June ordered the retail chain to pay Ksh2.7 billion ($27 million) owed to suppliers.

Tuskys CEO Dan Githua's known mobile telephone number was switched off when The EastAfrican tried to reach him in regard to the identity of the lender and whether the Ksh2 billion ($20 million) has hit Tuskys' bank accounts. Mr Githua had not responded to our text messages to the same phone number by the time of going to press.

Tuskys is struggling under the weight of debts that have seen some of Kenya's biggest consumer goods manufacturers take their products off the retail chain's shelves.

The retailer was served with a statutory notice demanding payment of the Ksh30.8 million ($308,000) debt on July 13 but did not pay up within the required window.

Under Insolvency Act or 2015, once a statutory notice is served on an individual or company, the debtor has 21 days to settle up or face an insolvency suit. Once served with a statutory notice, a company or individual can file an application in court to set aside the demand.

Syndicate Agencies argues that the insolvency petition it filed should be allowed to proceed, as Tuskys has not contested the statutory notice in court ever since being served on July 13.

Samson Kiplagat and a correspondent

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