After months of empty stalls at several Nakumatt outlets around sparked speculation over the future of the largest supermarket chain in Uganda, the retailers’ parent company in Kenya – Nakumatt Holdings has raised Ushs1.75 billion (about Kenyan Sh500 million) through a short- term loan in a deal expected to pave the way for entry of a deep-pocketed strategic investor into the business.
The transaction was disclosed by investment advisory firm Dry Associates, which arranged the private placement last quarter.
The firm said Nakumatt went to the market seeking KSh500 million through an insured loan and got all it wanted, signalling investors’ confidence in its ability to repay the debt.
The new loan comes ahead of Nakumatt’s plan to raise billions of shillings from the sale of a 25 per cent stake to an undisclosed investor.
The retailer made the move after a sharp rise in debt that has constrained its cash flows, leading to delays in paying suppliers. Part of the new capital is set to retire some of the outstanding debt that has earned the retailer a credit rating downgrade.
South Africa’s Global Credit Ratings (GCR) recently assigned Nakumatt a long-term rating of BB- down from BB, indicating a weakened ability to meet outstanding financial obligations.
“The rating downgrade reflects the notable deterioration in Nakumatt’s credit risk profile. Growth of the business has been highly leveraged, with the ever-growing working capital and capex requirements having been largely funded through short¬-term debt,” said GCR in the credit report.
The rating agency noted that Nakumatt’s debt burden had quadrupled in the last four years to KSh18 billion (Shs630) up from KSh4.7 billion (Shsh164b) in 2012 “placing unduly high pressure on the group’s gearing and liquidity position, with funding limits having largely been reached.”
Nakumatt’s operations are symptomatic of the pressure facing Kenya’s formal retailers in general, with several of the supermarkets delaying payments to suppliers amid a debt-fuelled and capital-intensive race to expand locally and in the region.
Nakumatt, Tuskys and Naivas jointly owed suppliers KSh8 billion (Shs280b) in unpaid dues in September last year.

Nakumatt operates nine outlets in Uganda, but most of the shelves at Oasis Mall, Metroplex Mall, Mbarara Branch, and Bukoto Branch have largely been empty. The supermarket is facing similar challenges in its market in Kenya.

Last year, Uchumi another Kenya-based supermarket closed its operations in Uganda, plunging unpaid suppliers into loss and protracted talks.