Choppies Enterprises Ltd is facing a $12.4 million debt owed to banks and suppliers in Kenya and Tanzania, as the retailer prepares to exit from the region after closing down its operations in March 2020.
The Botswana-based retailer, which is listed on the Botswana Stock Exchange and cross-listed on the Johannesburg Stock Exchange has discontinued operations in four countries — Kenya, Tanzania, Mozambique and South Africa.
Choppies disclosed in its 2020 annual report that in the 2019/2020 financial year, the board decided to discontinue the operations. The South African business was sold off at a loss of $8.2 million in April 2020, and a combined loss of $58,952 on disposal of plant and equipment of discontinued operations.
The retailer’s operations in Mozambique were closed in September 2019, followed by the operations in Kenya and Tanzania in March 2020.
According to the report, Choppies Enterprises Kenya Ltd and Choppies Distribution Kenya Ltd closed with potential liability of Ksh1.29 billion ($11.82 million) of which 25 percent will be borne by local shareholders, and the remaining formalities will be completed in 2021.
Its Kenyan operations have an outstanding debt of Ksh300 million ($2.75 million) with Absa Bank.
The repayment of the three-year loan, which was supposed to start on August 2020, is secured by a corporate guarantee provided by Choppies Enterprises Ltd and moveable assets valued at $1.29 million as at June 30, 2020.
Choppies founding shareholders have provided personal sureties towards the future obligations from its Kenyan subsidiary amounting to $6.47 million, with recourse thereafter to the Group.
In Kenya, Choppies invested Ksh1 billion ($9.17 million) to acquire a controlling stake (75 percent) in the then struggling Ukwala supermarket in 2016, with the remaining 25 percent equity being held by a Tanzanian firm Export Trading Group.
In Tanzania, Choppies faces a potential net liability of $577,700 after the board decided to sell the businesses of the group in the country, although there is still equipment from Aura and Mlimani stores that needs to be disposed of.
The net book value of non-current assets remaining for the Aura store is $300,000, since the value of the asset of the store had been written off due to pending liquidation.
According to the report, the Mlimani City management, where the retailer had one store, took custody of the store’s assets. Choppies Tanzania filed a claim against Mlimani City management for $600 000, which is currently in court.
There are no bank debts for Choppies in Tanzania.