After engagement with funders, guarantors, creditors, employees and management, the business rescue practitioners (BRPs) appointed to manage the embattled construction subsidiary of listed Basil Read Holdings is convinced that the business can be rescued.
This was the message the appointed BRP, Matuson & Associates, gave to creditors and employees of Basil Read Limited at their recent first meeting.
The listed Basil Read Holdings announced on June 15 that Basil Read Limited would be placed under business rescue, since it was unable to find bridging finance “outside of business rescue”.
The bridging finance was necessary to alleviate pressure on cash flow while the company completes construction projects, works on selling non-core assets and implements a turnaround strategy.
Five days later on June 20, trading in Basil Read Holdings’ shares was suspended after the group asked the JSE for some breathing space until the impact of the business rescue process on the listed group could be determined.
Trading has not yet resumed.
The BRP told the recent meetings of employees and creditors that the business rescue plan will be published on July 20 and stakeholders will vote on its adoption on August 3.
The BRP explained which divisions of the listed Basil Read Holdings are affected by the business rescue. It includes the roads, civils and buildings divisions, the construction plant business, and the first phase of the St Helena Airport Project (Shap).
Shap Phase 2 is not affected.
The BRP further told stakeholders: “Mining and Developments, which are housed in separate legal entities, are successful, self-sustaining and have to date partially subsidised the company’s construction business.”
Source: Matuson & Associates
According to unaudited statements provided to the BRP by Basil Read management, the company had R3.9 billion in assets by April this year. This includes about R500 million in work in progress, almost a billion rand in trade and other receivables, and R1.7 billion in loans to group companies.
At the same time the company’s liabilities amount to R4.6 billion, which includes R800 million in advance payments, R1.7 billion in trade and other payables, and R1.7 billion in intergroup loans.
The BRP says the proposed business rescue plan will include completing existing contracts where possible, resolution of claims, selling of non-core assets, and preserving and safeguarding the businesses outside of the process, namely mining, developments and Shap 2.
Securing finance post the commencement of business rescue is one of the critical success factors.
Matuson & Associates states: “It is the opinion of the BRPs that, notwithstanding the inevitable risks and challenges, there is a reasonable prospect of a successful business rescue”.
They base this on, among other things, the availability of post-commencement finance, the ongoing support of employees for the completion of existing contracts, the resolution of claims, and payment for work completed in the normal course of business.
They state that business rescue will be more beneficial to the company’s 4 730 employees and 2 500 indirectly employed staff of subcontractors than liquidation as it will preserve their jobs. Those that might be retrenched will receive their full entitlement.
The business rescue plan will require approval of 75% of all creditors and 50% of independent creditors, as well as 50% of security holders if any rights are altered.