Liquidation looms for Chemspec

A Chemspec factory. File picture: Supplied

A Chemspec factory. File picture: Supplied

Published Aug 4, 2015

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Durban - KwaZulu-Natal-headquartered listed company Chemspec - which was put into business rescue earlier this year - is catapulting towards liquidation following an urgent Durban High Court application yesterday in which a bank effectively called in a R74 million loan.

First Rand Bank secured an interim order authorising it to act on a general notarial bond it had as security for the loan.

The Sheriff has now been authorised to enter the company’s premises and take control of movable property, including stock, pending a further application for authority to sell the property.

The company has been reeling from reputational damage caused by its former chief executive Strath Wood, whose personal business dealings resulted in his being sued several times and then accused of leaving South Africa for the US leaving a trail of debt.

He has been provisionally sequestrated and a judgment is awaited on an application to finally wind up his estate.

The company, which has branches all over South Africa, was put into voluntary business rescue by its own directors “because of cash flow problems” and up until last month, the business rescue practitioners appeared confident of success.

But observers said yesterday’s application would change this and it could be the last chapter of the once-successful company’s life.

In his affidavit which came before Judge Yvonne Mbatha, First Rand Bank senior relationship manager Sivapragasan Naidoo said one of the “default” conditions of the loan was if there were any steps taken to place it into business rescue or liquidation.

In these circumstances the bank could immediately demand repayment of the outstanding balance.

Naidoo said that time had come.

He said the bank had participated in trying to rescue the business and keep it afloat in the hope of securing a buyer. This had proved a futile exercise.

No hope

“The prospective purchaser had until close of business on July 31 to contract for the sale. That purchaser has now resiled and there is no hope of a rescue.”

He said the calling in of credit facilities would mean manufacturing would come to a “grinding halt”.

He said he suspected that the two business rescue practitioners, Pierre Berrange and Richard Ferguson, were contemplating liquidation proceedings and the bank wanted to “secure its position” ahead of this, although it would not remove any goods at this time.

He said the fact that the practitioners knew of the application and had agreed to abide by the decision of the court was a sign that they no longer believed the business could be saved.

The business rescue practitioners did not respond to messages from The Mercury yesterday and the newspaper was unable to establish how much other creditors were owed, but in March the total debt was said to be R290m.

About 50 staff members have been retrenched in a restructuring exercise, but it is not known how many are employed at present.

According to reports on the company’s website, the practitioners were contemplating various scenarios, including selling the business as a whole to a larger industry player, breaking it up into divisions (automotive, industrial and decorative) and selling them off separately, and an aggressive restructuring.

Only if these failed would liquidation be contemplated.

The practitioners have asked creditors for three extensions to their deadline to file their business rescue plan, the most recent being in June when they reported that they had received several non-binding offers for the business and negotiations were continuing.

“We believe the efforts to conclude a transaction as a going concern outside of a liquidation process will benefit all creditors. The company is continuing to trade as best as possible to preserve its underlying value,” they reported.

The company’s listing on the AltX Exchange has been suspended since March.

THE MERCURY

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