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Stuttafords business rescue derailed by irate creditors

Nearly 30% of creditors reject the rescue plan, that would see large write-off.

Nearly 30% of Stuttafords creditors have rejected an amended business rescue plan, that would see an estimated 77% write-off of what they are owed by the department chain.

The 159-year-old retailer met with shareholders and creditors on Monday to discuss its future after initial talks degenerated into a standoff between management, shareholders and creditors.

A new rescue plan was presented to creditors on Friday evening, after they rejected the initial plan that was published on February 7. Nearly 30% of the company’s creditors rejected the plan, falling well short of the requisite 75% needed for approval.

This leaves Stuttafords with four options: apply for liquidation, submit an amended plan (for the second time), buy creditors’ voting rights, or embark on court action to set aside the votes of creditors. The retailer will publish a revised plan on Tuesday.

Stuttafords placed itself into voluntary business rescue in October 28, entering into negotiations with its creditors to buy it time on its financial obligations

Creditors, who are owed R836 million – as contained in the business rescue plan drafted by practitioners Neil Miller from Mazars and RS Advisors’ John Evans – include Levi Strauss (R2.2m), L’Oréal SA (R13.5m), Tommy Hilfiger (R14.6m), Polo (R10.9m), Puma (R2.1m) and many others.

Under the initial rescue plan, it was proposed that creditors would be paid 5 cents in the rand and an additional 18 cents in the rand over the next 18 months.

The payout to creditors has been reduced to 2 cents in the rand. Creditors get an additional 21 cents in the rand over the next 21 months and a further undisclosed final distribution. Essentially, creditors will be taking a 77% write-off on their debt, which is not secured against Stuttafords’ assets.

There’s a catch in qualifying for the additional 21 cents – creditors have to continue supplying Stuttafords with merchandise on consignment, or on 120 days credit terms, as it isn’t in a position to purchase stock for the 2017 winter season. 

Lawyer at Hogan Lovells Gareth Cremen who, together with his colleague Alex Eliott, represents some of the creditors, says the rescue plan’s proposal is prejudicial to smaller suppliers to the benefit of certain shareholders.

For example,  the retailer’s key banker Nedbank, which is owed R147 million (reduced to approximately R120 million through the plan), will get most of its money back as its debt is secured.

Shareholder ructions

The retailer’s management company Vestacor, headed by CEO Robert Amoils, will invest R10.3 million for a 56% stake in the “new Stuttafords”. This effectively means that the entire shareholding in Stuttafords is worth approximately R15 million and will result in the shareholding of most existing shareholders being diluted to below 15%.

Name of shareholders (Before dilution)

Name of shareholders (After dilution)

 

Ellerine Brothers

26.42%

Ellerine Brothers

1.02%

David Goodman

7.20%

David Goodman

0.28%

Loringwood Investments

26.42%

Loringwood Investments

1.02%

Daniel Reichenberg

2.50%

Daniel Reichenberg

0.04%

The Allan Bruce Rubenstein Family Trust

1.92%

The Allan Bruce Rubenstein Family Trust

0.08%

The Rosylen Jacobs Family Trust

1.92%

The Rosylen Jacobs Family Trust

0.08%

The Susan Barbara Rubenstein Trust

1.92%

The Susan Barbara Rubenstein Trust

0.08%

Dan Orbach Trust

1.92%

Dan Orbach Trust

0.07%

Ellaine Orbach Trust

1.92%

Ellaine Orbach Trust

0.07%

Louise Orbach Trust

1.92%

Louise Orbach Trust

0.07%

The Jafigo Trust

5.77%

The Jafigo Trust

0.23%

Vestacor

20.14%

Vestacor

0.76%

   

Stuttafords Stores

13.90%

   

Management of  Stuttafords International Fashion Company

20.08%

   

New buyer (led by Robert Amoils)

56.12%

       

Furniture retail family Ellerines Brothers, which owns a 26.42% stake, has accused Stuttafords of not consulting it on the rescue plan before it was submitted to creditors. It has proposed changes of its own: firstly, Amoils stepping down. Ellerines brothers have proposed injecting R12 million in the company for a 76% stake in Stuttafords and have been in contact with other potential buyers.

The business rescue plan reveals the retailer’s monumental losses. In the year to June 2015, it made a loss of R59.8 million as a result of rising operating expenses and finance costs. It extended losses in the year to June 2016, clocking up a loss of R46.5 million.

Rescue practitioner John Evans says all stores traded profitably from October to January 2017, recording a gross profit of R82.8 million on the back of total sales of R176.9 million. Amoils, who is Stuttafords’ fourth CEO in ten years, has repeatedly maintained that the retailer will have a fighting chance after the rescue plan is approved.

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a mirror image of sa – stuffed!

What baffles me about your comments Robert is why do you bother seeing that you do not live here? Also why do you write in a manner that you must know will anger loyal South Africans? Does that give you some kind of weird joy? I ask these questions sincerely because I’m trying to understand your motivation for taking the effort to submit these unhelpful comments.

Because he has to continually justify why he left.

I am here for 2 reasons:- 1) to show that your ONLY concern should be how to extract you and your family out of Africa. I was recently contacted by a reader of my comments and I am helping him in this task 2) for someone who bought Barclays bank plc just after the GFC at .42p and sold it when it got to £3 and did the same with deutsche bank last year (bought at euro 10 sold at 16)I believe I have bit of financial nouse AND don’t charge for it!

Thank you for your reply Robert. You seem to believe that if you irritate people enough that they will agree with you and do what you want, i.e. “extract you and your family out of Africa”. Unfortunately people tend to do the opposite when you irritate them. Each time I read your comments I become more determined to stay in South Africa and build this beautiful country. Some advice for you – be careful that the reader who contacted you about leaving South Africa is not one of those shady characters facing jail time we read about in Moneyweb. In terms of your financial nouse – you might not charge people for your advice but you certainly charge your own ego.

Biz Rescue is the worst option. Never works and the appointed rescuer creams it to detriment of creditors. What is he going to do differently to make it work. Kiss of death.

Ag ou Rob is either a fake or a very unhappy and envious soul without a life. Small things amuses small minds.

End of comments.

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