South African retailer Edcon gets $191 mln recapitalisation
By Nqobile Dludla
JOHANNESBURG, March 1 (Reuters) - South Africa's Edcon
has secured 2.7 billion rand ($191 million) in new
cash and rent deductions as part of a plan to recapitalise the
struggling department store chain.
The owner of Edgars and stationary retailer CNA has been
grappling with its debts for several years, after troubles in
its credit business in 2014 coincided with an economic slowdown
and weak consumer spending.
In January, Edcon's chief executive Grant Pattison said it
needed 3 billion rand ($226 million) in financing over the next
three years to allow it time to "fix" its business.
Edcon, which vies for market share with TFG,
Truworths and international chains such as Zara and
H&M, is one the biggest names in South African retail, employing
more than 14,000 full-time staff in over 1,100 stores.
It has been in talks with lenders and other investors about
injecting money, while asking landlords to reduce rents in
exchange for equity in the company.
"This is a significant step forward towards ensuring the
restoration of our balance sheet and putting the company back on
the path to success," Pattison said of the deal with Edcon's
secured lenders, the government pension fund and landlords .
"It will provide management with a sufficient time-frame to
implement the store estate restructure and focus on returning
the business to profitability."
Edcon said the recapitalisation will result in the removal
of all of its interest-bearing debt and also introduce a new
group structure and set of shareholders.
Once all conditions have been finalised, the shareholders
will consist of Edcon's existing lenders, the Public Investment
Corporation and participating landlords of Edcon, as well as
Edcon's employees, it said.
The Southern African Clothing and Textile Workers’ Union
welcomed the announcement, saying in a statement that the
agreement means "a job massacre has been averted in the local
clothing manufacturing industry."
Edcon currently occupies 5.3 percent of Liberty Two Degrees'
Ltd total portfolio gross lettable area (GLA) and this
exposure is anticipated to reduce to 4.3 percent of total GLA by
Dec.31, the real estate investment trust said in a statement
after the announcement.
While Redefine Properties Ltd, a significant
landlord of Edcon, said it agreed to rental reductions up to the
maximum amount of 13.8 million rand ($974,569.39) over a
two-year period in respect of leases totalling 21,972 square
It's equity contribution will be 54.6 million rand, it added
in a statement.
($1 = 14.1601 rand)
(Reporting by Nqobile Dludla
Editing by Alexander Smith)
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