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New standoff delays Stuttafords’ rescue plan

Rescue practitioners and Ellerine Brothers are at loggerheads over the implementation of a plan to save the struggling retailer from liquidation.

A fresh standoff has ensued between Stuttafords and SA’s elite furniture family Ellerine Brothers, which could jeopardise the fashion retailer’s crucial business rescue process.

Since Stuttafords placed itself into voluntary business rescue on October 28, management, shareholders and creditors have been jostling over a contentious rescue plan to save the 159-year-old retailer from liquidation.

In March, approximately 85% of creditors voted in favour of an amended rescue plan, which will see Ellerines feed R12 million into Stuttafords for a 76% stake. It currently owns a 26.4% stake in Stuttafords Stores, Stuttafords’ parent company.

Under the Ellerines-backed rescue plan, venture capitalist firm Vestacor would cede management of Stuttafords, paving the way for an unnamed retail expert to run the show.

Moneyweb has seen heated letter exchanges between attorneys representing rescue practitioners and Ellerines, which said it wasn’t obligated to inject money until a number of key concerns were addressed. This effectively delays the implementation of the approved rescue plan.

Fluxmans Attorneys’ Colin Strime, who represents rescue practitioners Neil Miller and John Evans, sent a letter on April 10 to Jane Andropoulos, a Bowman Gilfillan attorney representing Ellerines, on whether it still planned to inject R12 million.

Andropoulos responded that Stuttafords had not met conditions of the plan including the retailer agreeing with its landlords for continued tenancy and the reduction of rent and Nedbank (Stuttafords’ banker) or other financial institutions providing the retailer with a new overdraft facility.

Ellerines said it was also frustrated by its attempts to access Stuttafords’ financial records in order to determine whether it’s capable of rescue and engage with creditors on whether they would continue to supply the retailer. Based on these concerns, Ellerines believes that Stuttafords doesn’t have sufficient agreements with creditors that would enable it to continue on a solvent basis.

Creditors – as contained in the rescue plan – are owed R836 million including Nedbank (R120 million), Levi Strauss (R2.2m), L’Oréal SA (R13.5m), Tommy Hilfiger (R14.6m), Polo (R10.9m), Puma (R2.1m), Adidas (R1.34m), Estée Lauder (R53.8m) and many others.

Under the approved rescue plan, creditors will be paid 4 cents in the rand, an additional 21 cents in the rand over the next 21 months and a further undisclosed final distribution. This means that creditors will be taking an estimated 75% write-off on their debt.

The retailer has nine department stores and 16 mono-brand stores (brands with their stand-alone stores) and three stores outside SA (two in Botswana and one in Namibia). Various creditors of Namibia and Botswana have not been paid by Stuttafords.

Rescue practitioners respond

The rescue practitioners said they were “shocked and astounded” by Ellerines’ latest assertions and accused it of trying to “escape” from its promises. Since creditors voted in favour on March 8 on a rescue plan amended by Ellerine to include its cash injection, Strime said it was always privy to Stuttafords’ financial information and that it had an opportunity to meet with some creditors. He added that a number of agreements have already been concluded with suppliers and “huge strides of progress” have been made with landlords.

“If your clients [Ellerines] persist with their attitude again, we reiterate that this will most likely lead to the liquidation of Stuttafords,” he said in the letter dated April 19 to Andropoulos.

He further claimed that Ellerines refused to meet with Nedbank to arrange new overdraft facilities and withdrew from a crucial equity process after the rescue plan was approved, in which bidders were invited to subscribe for some or all of the equity in the company – signs that it was no longer interested in rescuing Stuttafords.

An urgent meeting with creditors will be held on Wednesday to discuss prospects of the business rescue.

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As usual – where there is sh.t and discord, attorneys are happy to step in.
I wonder what the combined billing rate of these lawyers are and whether their presence is the cause of the standoff.

As usual – where there is sh.t and discord, attorneys are happy to step in.
I wonder what the combined billing rate of these lawyers are and whether their presence is the cause of the standoff.

You sound like Minister of Health. Blaming the lawyers for medical negligence claims against hospitals.

Refreshing to see a brand with such a polished facade in such a state. It’s all smoke and mirrors in the store with the ambience, etc so they can hike prices but seems it’s failing

Takes the saying “Not all that glitters is gold” to a whole new level….

I never believed this rescue was going to work. The retail business worldwide is being affected by on line sales. The country has been junked – it does not need a high cost retailer. Close it down, sell the property & move on

Stuttaffords is expensive hence why they wont survive anymore….selling top brands…i feel sorry for the new team that will want to bring change..close to 30million black ppl cant afford to buy at Stuttafords stores and some of them are working…get rid of the high brands and all these glitz and glamour in the stores!keep it simple!!i am from the townships i know…we pass stuttafords stores everytime at the malls!!

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