The list of Edcon’s secured creditors, published as part of the business rescue plan on Monday, reveals that a total of R3.7 billion is owed to more than 80 entities.
The list of unsecured creditors is likely far larger (running to many more billions), but these businesses are either fourth or last in the queue, depending on their status.
The business rescue practitioners have announced that they are pursuing an accelerated sales process of parts of the Edcon group after no buyers nor any investors were found for the entire business.
Edcon – Third time lucky? (Mar 30)
Edcon can be saved, say administrators (May 20)
Edcon looking for buyers to rescue struggling retailer (Jun 9)
Aside from the two operating divisions (Edgars and Jet), which are arguably less and more attractive respectively, the group’s second-look credit book will no doubt find a buyer. It is unclear what value the Thank U rewards business would have by itself. They hope to conclude this by July with a completion of the transaction(s) as soon as practically possible. The practitioners have noted there are 15 interested parties.
The UIF is owed more than R888m
The single largest creditor is the Unemployment Insurance Fund (UIF), represented by the Public Investment Corporation. The UIF is owed R888.8 million, thanks to instruments that allow it a conditional claim under business rescue (and/or liquidation). It invested a total of R1.2 billion into the group as part of a R2.7 billion recapitalisation in March last year.
Next-largest is the R834 million owed to various Apollo entities, while the third-biggest claim is from AlbaCore Capital (R496 million). The former is the global private equity group, while the latter is a European investment firm that focuses on “private debt and opportunistic credit investments”. These entities would have claims based on them being a bondholder under the former Edcon structure. Those debt holders became equity holders as part of the recapitalisation.
Four of the country’s five largest commercial and investment banks (with the exception of Nedbank) have claims totalling R976 million
|Standard Bank||R380 013 468|
|Absa Bank||R310 925 395|
|Investec Bank||R156 524 372|
|FirstRand Bank (through RMB)||R128 763 782|
|R976 227 017|
A further three global investment banks have claims totalling R358 million
|Goldman Sachs||R174 046 745|
|Standard Chartered Bank||R100 379 117|
|Deutsche Bank||R83 721 787|
|R358 147 649|
Listed property groups have claims totalling roughly R100 million
|Growthpoint Properties||R34 496 037|
|Redefine Properties (including related entities)||R21 251 672|
|Liberty Two Degrees||R9 377 156|
|Resilient||R8 585 937|
|Hyprop Investments||R7 847 338|
|Vukile Property Fund||R4 374 438|
|Accelerate Property Fund (including related entities)||R2 482 251|
|Attacq||R2 441 295|
|Rebosis Property Fund (including related entities)||R2 332 500|
|Investec Property Fund||R1 869 460|
|Fortress Income Fund (including related entities)||R1 843 798|
|Arrowhead Properties (including related entities)||R757 293|
Other major landlords who are secured creditors include Pareto (R6.8 million), and insurers Liberty Group (R18.7 million) and Old Mutual (R11.7 million). This, along with the amounts owed to listed and unlisted property groups. comprises the unpaid rent accrued since Edcon filed for business rescue. The practitioners have been paying rent based on a percentage of turnover being generated in each store. Any unpaid leases prior to Edcon filing for business rescue will be treated as unsecured.
As at April 30, assets totalling nearly R4.4 billion were held as security by the creditors. These include property, plant, equipment, trade receivables, amounts owed by related parties (mostly African operations), sundry receivables and prepayments as well as cash.
Under the business rescue plan, the secured creditors will receive all trading proceeds being generated from the sale of stock under the current business rescue process as well as the proceeds from the sale of Edcon’s second-look credit book.
The rest of the list …
Any proceeds thereafter, in other words from the accelerated sales process, will be allocated in the following order:
- Business rescue costs (including advisors and legal costs)
- Employees (to the extent that they have not been paid during the business rescue process)
- Secured (post-commencement finance) creditors
- Unsecured (post-commencement finance) creditors
- Employees (to the extent that they have not been paid prior to the business rescue process)
- Unsecured/general concurrent creditors.
The business rescue practitioners make the point that without an accelerated sale of the business or parts thereof, a wind-down process is still preferable to liquidation. Secured creditors would receive 19 cents in the rand under a wind-down process, and only 5.5 cents in the rand in a liquidation.
Listen to Nompu Siziba’s interview with independent analyst Chris Gilmour: