The board of embattled clothing retailer Edcon has passed a resolution for the group to go into voluntary business rescue due to a massive R2 billion economic fallout from the Covid-19 lockdown, the group confirmed in a statement on Wednesday morning.
Edcon, which owns around 900 Edgars and Jet stores countrywide, said it would “file for business rescue in the course of the next few days”.
The group has been trying to turnaround its fortunes under new CEO Grant Pattison and in March last year secured a R2.7 billion “recapitalisation funding” lifeline from the Unemployment Insurance Fund (UIF) via the Public Investment Corporation, existing lenders and several of its landlords to stay in business.
“Following the coronavirus outbreak in South Africa, and the President’s first announcement on Sunday, 15th March Edcon has lost R2 bilion in sales. The sales miss, and the decline in collections of the debtor’s book has meant that meant that Edcon is unable to pay its suppliers for both the March and April month-ends.
“Paying April salaries will require assistance from the UIF Covid-19 TERS program,” the group noted in its statement.
“Edcon also anticipates that the sales will be depressed for some time during the ‘Covid-19 Risk Adjusted Strategy’ phase, which may last several months.
“The R2.7 billion [circa R230 million of which was still due to be received to March 2021] cash provided to Edcon in the last restructuring has been substantially utilised funding the losses for the financial years ending March 2019, and March 2020, as planned. Edcon was on track with its business plan to the end of December 2019,” it added.
Pattison says Edcon’s stores will open on the 1st May, but we will have do so under business rescue.
“This decision was made in the best interest of our company and all our stakeholders. In the short time that has been available to us, we have been unable to raise the funds needed to pay the creditors for the March and April month-ends,” he notes.
“In this circumstance, South African law requires that the company either be placed in liquidation or business rescue. To provide us with a longer period to raise the money, the board has taken a decision to file for business rescue,” Pattison adds.
“We will be working closely with the appointed business rescue practitioners , shareholders and government to find a way to plug the financial hole. It is my hope that some version of the business will emerge to continue to serve customers,” he said.
Business rescue practitioners Piers Marsden and Lance Schapiro will be handing Edcon’s business rescue proceedings.
“The safety and well-being of our employees, customers and partner employees is our priority as we open up again.
“I am unable to provide any further information at this stage other than to say that the company will continue to keep you updated on developments as the situation unfolds,” Pattison pointed out.
Brought to you by Moneyweb