Groundbreaking R2.7bn deal will see the PIC, through the UIF, landlords and existing secured lenders rescue the retail giant.
Edcon has been saved. Thousands of workers within South Africa’s largest clothing retailer, its suppliers and even landlords breathed a collective sigh of relief on Friday as the group announced that it had secured R2.7 billion in new funding to recapitalise the cash-strapped company.
Had Edcon not secured the funding, it might have gone into a business rescue process. However, the size of the business, its debt and scale of its restructuring would have meant a business rescue would have had slim chances of succeeding. Over the past year Pattison said that Edcon has made headway on the operational front by focusing on staff and customer service; getting rid of Edcon’s internationally branded stores and focusing on its higher margin local clothing lines; bringing down stock levels; rationalising and upgrading stores around the key Edgars, Jet and CNA brands; and rebuilding Edcon’s credit and insurance division under its Thank U customer loyalty programme.
“Edcon’s businesses are key players in the South African retail market and this is an important turning point for a company focused on delivering growth and creating value for all its stakeholders going forward,” Edcon chairman Gareth Penny said in a statement announcing the agreement. For South Africa’s retail property sector, the agreement is unprecedented and it remains to be seen how Edcon’s competitors and other major retailers respond. Effectively the agreement will see JSE-listed Real Estate Investment Trusts and private property companies that lease retail space to Edcon becoming its shareholders.“Between 20 to 30 of our landlords have agreed to be part of the process, but this could increase as some negotiations are still ongoing.
Redefine Properties confirmed in a Sens announcement on Friday that it was also party to the Edcon recapitalisation agreement. It said its equity contribution would amount to R54.6 million, in addition to agreed rental reductions up to a maximum of R13.8 million over a two-year period. Redefine is a significant landlord to Edcon, with 78,760mLiberty Two Degrees and Resilient Reit also have high exposure to Edcon.
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