The future of the Mega retail chain is likely to be determined in court this week, sources around the company believe. According to them, the attempt to sell the Mega in Town chain was unsuccessful, and the growing pressure from suppliers raises a question about the chain's ability to continue operating next week. Mega is now on the precipice of a stay of proceedings
Mega is due to pay its suppliers tens of millions of shekels on Friday, and as of now, there is no certainty that it will be able to make the payment. If Mega does not pay, the suppliers will immediately halt the supply of merchandise to the chain.
"If there's no money on Friday, we won't supply fresh produce, and if we don't supply it, there will be no chain next week," said one supplier of fresh produce.
Demanding payment in cash
Mega's sales are declining, owing to a growing shortage of products and the demand by suppliers for payment in cash. The chain has had to comply with this demand, at least in part, which is disrupting its cash flow.
According to one of the suppliers, "As soon as the supply graph goes down, Mega's ability to make payments is constricted. The suppliers are waiting to see what happens this Friday."
Sources inform "Globes" that Mega has been paying the Tnuva Food Industries Ltd. group in cash for merchandise for several weeks. According to various sources, a similar demand was also made in recent days by the Osem Investments Ltd. (controlled by Nestle SA (SWX:NESN)) (TASE: OSEM) group, which substantially reduced its supply of merchandise to the chain, and by the Central Bottling Company (Coca Cola Israel), which is also supplying only a reduced quantity of goods to Mega. Coca Cola Israel formerly possessed a guarantee from Mega parent company Alon Holdings Blue Square - Israel Ltd. (NYSE: BSI; TASE: BSI) for the supply of merchandise to Mega, but the validity date for the guarantee has passed, and Alon Holdings has not renewed it.
Coca Cola Israel said in response that it did not comment on its relations with its customers in the media. Osem said, "The company is continuing to supply merchandise to Mega in the framework of the approved amount of obligo, including now."
Published by Globes [online], Israel business news - www.globes-online.com - on January 12, 2016
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