Cash strapped Deacons has fired over 93 employees, among them directors in what administrators call a “cost-cutting” recovery move.
Speaking to shareholders yesterday, joint administrators Peter Kadhi and Atul Shah revealed that the retailer needed at least Ksh450 million injection from shareholders in order to reduce the debt burden.
According to Shah, in case of liquidation, creditors would lose 95 per cent of their debt, while unsecured creditors would lose 100 per cent of their debt. This would amount to over Ksh1.9 billion since liquidation would only yield Ksh63 million.
Currently, the revenue income for the firm has reduced to approximately Ksh646 million annually, compared to its hey days when it used to make over Ksh2.3 billion per year.
“Staff cost reduction will be achieved across open branches and the head office. We have cut the staff size to around 60 down from 153,” said Mr Shah.
In further cutting cost measures, the firm will relocate their head office from Norfolk Towers to their warehouse.
So far, Deacons has closed four branches and now remains with only eight. They are also contemplating of selling their Uganda and Rwanda branches in order to manage their debt crisis.
Out of 37 shareholders in the meeting, 11 agreed with the administrators’ proposal to have shareholders pump in Ksh450 million for recovery while 26 asked for a modification to have all shareholder compelled to pump in the money within a month.
The remaining directors, including the CEO Mr Wahome Muchiri are also facing exit, according to the administrators’ proposal.
“We have retained directors with view to getting the history of creditors and other crucial information, but we may have to replace them. We need fresh management to deal with issues,” added Shah.
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