JOHANNESBURG - Basil Read has secured R265 million in post-business rescue commencement funding, which is crucial to the successful execution of its business rescue plan.
Khathutshelo “K2” Mapasa, chief executive of Basil Read, confirmed at the weekend that Basil Read Limited, the whollyowned subsidiary of Basil Read Holdings that housed the group’s construction division, which had voluntarily been placed under business rescue in June, had signed the required agreements on August 8 for the post-business rescue commencement funding.
“I am breathing a lot better. I can not overemphasise the importance of post-business rescue commencement funding. “Most business rescues that are not successful are because no post-commencement finance was secured. Without those funds, you can’t really rescue a business,” he stressed. Basil Read’s announcement coincided with listed engineering and construction group Esor, which last week filed for business rescue, applying to the JSE for trading in the company shares to be suspended.
A number of other prominent construction companies have been experiencing financial difficulties, largely because of the dearth of large government-funded construction and infrastructure contracts.
The privately black-owned Liviero Group has been placed in voluntary business rescue last month, while listed construction groups Aveng and Group Five have also been experiencing financial difficulties.
Mapasa said the funds Basil Read had secured would be used to execute the contracts the construction division had been awarded, particularly the onerous contracts it had been trying to complete.
It would enable the company, once it had completed these contracts, to pursue any claims it had associated with any of the contracts, he added. Mapasa said the business rescue plan for the construction division would be announced today, adding that the funding secured was sufficient to execute the plan.
A meeting of creditors is scheduled to be held on September 3 to approve the plan. Mapasa stressed that he never had any doubts about being able to rescue the construction division, despite it experiencing “a liquidity crunch”. He said there was tremendous goodwill towards Basil Read and they had received a lot of support from their clients.
“When a company goes into business rescue or potential liquidation, the client has the right to terminate the contract. “We have got 17 contracts in construction alone. To date, only two of them have been cancelled.
To me that says these clients want us to complete the work… “Some clients have also indicated that they were willing to provide funding, in a form of post-commencement financing, to enable their project to be completed by Basil Read. “That makes me quite confident this company can be saved,” he said.
Mapasa said the two contracts that were cancelled were loss-making projects where Basil Read was funding losses to complete these projects. “Maybe there is a bit of a silver lining in those contracts having been cancelled, because we now don’t have to fund the losses to complete them,” he said.
Mapasa added that Basil Read’s mining and development operations, the other parts of the business that were not in business rescue, had not had any contract cancellations and had secured additional work.
“I’m not yet ready to make an announcement about that, but we have actually managed in the past two months to see growth in those businesses.” Mapasa said a business rescue plan was an opportunity for the company to restructure its debt and see whether it could be rehabilitated.
He pointed out that there were two outcomes from a business rescue: the winding down of a company or the rehabilitation of a company, so that it emerges being able to continues to trade. Trading in Basil Read shares on the JSE has been suspended