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Edcon lender talks signal final step in Bain refinancing plan

CEO of South Africa’s biggest retailer plans store closures.

Edcon Holdings Chief Executive Officer Grant Pattison said talks between owners and lenders to refinance about 200 million euros ($248.3 million) of debt signals the final step in a recovery plan put in place when Bain Capital Private Equity ceded control.

Banks and secured bondholders, including Franklin Templeton, Sanford C Bernstein in New York and Harvard University Pension Fund, took over Edcon in 2016. The owner of the Edgars and Jet chains had been struggling under foreign-currency debt used to finance its 2007 acquisition by Boston-based Bain for R25 billion ($2.1 billion).

“The restructuring included the refinancing of this debt in September this year, and we’ve now entered the period where we have to refinance that,” Pattison said by phone. “This is the last step in the refinancing plan from when Bain exited.”

The CEO, who replaced Bernie Brookes last month, said the creditor’s plan has been “well implemented,” even as Edcon continues to struggle with weak South African consumer confidence and declining sales.

“The plan required a higher sales growth,” he said. These types of talks “tend to be stare-you-down discussions. This is the nature of debt markets. People only tend to solve the problems at the last moment.”

Edcon’s retail sales fell 9.4% in the three months through Dec. 23 to R7.6 billion, the Johannesburg-based company said in a statement Wednesday. The retailer has sold its Legit unit and as the retailer exited some international brands and closed unprofitable stores. Gross profit margin rose almost 200 basis points to 38% as it reduced the number of clothes sold at discounted rates.

Pattison said he plans to close more stores, reduce the size of some shops and offer fewer discounts.

© 2018 Bloomberg

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