Group Five’s listing on the JSE will be terminated and the company wound up but between 3 000 and 3 500 jobs saved through the restructuring and sale of businesses and contracts to new owners.
This is according to business rescue plans published for the group and its main operating subsidiary, Group Five Construction.
Business rescue practitioners Peter van den Steen and Dave Lake of Metis Strategic Advisors believe the shortfall or losses to creditors from the process will be R5 billion less than under a liquidation.
On successful implementation of the business rescue plan, secured creditors are expected to receive distributions of between 66c and 78c in the rand compared to 18c forecast in a liquidation.
Concurrent creditors (people and entities with unsecured claims) are expected to receive distributions of between 9c and 20c in the rand compared to the 3.4c forecast in a liquidation.
It is not anticipated that there will be any return to the shareholders of Group Five Limited.
The business rescue processes for Group Five Limited and Group Five Construction are two legally separate proceedings, with two separate business rescue plans. Voting on both will take place in consecutive meetings on September 11.
The plan states that if the business rescue plans are not adopted by creditors, the business rescue procedures will have to immediately be converted to liquidation proceedings.
The business rescue practitioners have secured funding from the lender banks to provide operational solvency during the business rescue proceedings and to ensure that asset sale values are optimised and losses from projects minimised.
Group Five Construction represents the majority of the businesses, claims and recovery value within the greater Group Five group of companies.
Everite, the fibre cement manufacturer and supplier of various building products to the building industry, is the only asset that will realise proceeds for Group Five Limited and is currently being disposed of in a controlled sales process.
However, a pledge and cession made to funding banks – related to Group Five Construction’s borrowings and bond exposure, together with Cenpower Generation Company, the client for the $410 million Kpone power plant in Ghana, calling up bonds of about R1.5 billion for this contract – means the lender banks will be the only recipients of the proceeds derived from the sale of Everite.
Group Five Limited will also not realise any recovery from the business rescue proceedings of Group Five Construction.
Secured creditors represent 97.64% or R1.66 billion of total creditors of R1.7 billion in Group Five Limited.
Group Five Limited’s secured creditors:
- Absa (R7 million)
- HSBC (R888 million)
- Lombard (R711 million), and
- Standard Bank (R58 million).
It is not anticipated there will be any return to the company’s creditors other than the secured creditors.
The largest concurrent creditor Group Five Limited is Credit Guarantee Insurance Corporation (CGIC), with a claim of R38.9 million
Group Five Construction incurred losses totalling R2.1 billion in its 2017 and 2018 financial years. Further, about R2.3 billion in losses were incurred in the eight-month period to February 28, 2019, with major losses and material negative cash flows forecast for the group for the balance of this calendar year.
Van den Steen and Lake said wherever possible, subsidiaries and operating divisions of Group Five Construction had been or were being restructured and disposed of to new ownership, for fair value, on a solvent basis and as going concerns.
Where this is not possible, a controlled wind-down of the relevant subsidiaries and companies, as well as the head office of the company, will be implemented.
They said all other assets of the company were being vigorously pursued and/or disposed of in controlled disposal processes.
They anticipate completing most sales by the end of March next year despite some of the processes including complex sales of international assets and/or regulatory procedures and approvals that are outside of the control of the business rescue practitioners.
“There have been no fire sales of assets and companies and we will not make any fire sales in future,” they said.
“We are actively engaged with our construction clients to minimise disruptions in those projects. We also continue to carefully manage group costs and to reduce them in accordance with the diminishing requirements of the company.