EDINBURGH — Knights in shining armour in the form of landlords, lenders and the state asset manager, the Public Investment Corporation, have to come to the rescue of an estimated 30,000 jobs by putting together a deal to keep Edcon – owner of prominent South African retail brands Edgars, Jet and CNA – afloat. The company has been in trouble for some time, suffering slowing consumer demand in recent years as have other businesses amid the struggling SA economy. Also not helping Edcon has been its massive debt. Landlords would have missed the Edcon shops, which are regarded as anchor tenants that serve as magnets for shoppers. With other South African retail staples like Stuttafords disappearing from malls, it is unsurprising that big landlords have been keen to do a deal to keep occupancy levels up. – Jackie cameron
By John Bowker
(Bloomberg) – Edcon Holdings Ltd. secured R2.7bn ($191m) from lenders, landlords and the Public Investment Corp. as South Africa’s largest clothing retailer wraps up its latest restructuring plan.
The deal will free the Johannesburg-based owner of the Edgars, Jet and CNA chains of all interest-bearing debt and will see its backers become new shareholders, Edcon said in an emailed statement on Friday. The funding from landlords will come in the form of rent reductions, the retailer added.
The news comes three years after Bain Capital Private Equity LP handed the company to creditors after a 2007 buyout turned sour. Edcon continued to struggle under a debt burden that was a legacy of that deal, and Chief Executive Officer Grant Pattison, formerly of WalMart Inc-owned Massmart Holdings Ltd., has been working on a turnaround and restructuring for much of his year in charge.
At stake were the livelihoods of about 30,000 employees, a supply chain that includes 750 companies and floor space that accounts for one tenth of the occupancy in South Africa’s biggest shopping malls. More than one in four people in the country are unemployed.
Pattison’s attention will now turn fully to restoring the fortunes of Edgars, the flagship brand, low-cost clothing specialist Jet and stationery chain CNA. Edcon has been closing shops and reducing floor space, and “numerous other strategic initiatives are underway,” the CEO said in the statement.
“There was encouraging progress over the festive and back-to-school trading periods,” he said. “Reassuringly, our credit sales growth has exceeded our cash sales growth for the past several months, and the number of active accounts has increased for the first time since 2012.”
The restructuring brings on board the PIC, Africa’s largest money manager with about R2trn in assets. The Pretoria-based company, which administers government-worker pension funds, is the subject of an ongoing inquiry into how it makes investment decisions after a series of scandals last year.
Redefine Properties Ltd. contributed R54.6m of equity agreed to rental reductions of as much as R13.8m, the Johannesburg-based real estate firm said in a separate statement.
Source: Bloomberg
