The group, which has struggled to remain solvent, said it had entered business rescue after it failed to secure bridge funding from lenders.
“After protracted negotiations with such a consortium of lenders, Basil Read was advised on June 14 that the majority of such a consortium of lenders were not prepared to make bridge funding available to Basil Read outside of business rescue,” the company said.
“As a result, the board of Basil Read advised Basil Read Holdings it has commenced with voluntary business rescue proceedings as provided for by section 129 of the Companies Act.”
The company appointed Siviwe Dongwana of Adamentem Chartered Accountants and John Lightfoot of Matuson and Associates as business rescue practitioners.
The group had gone cap in hand to lenders as it tried to secure bridge funding to complete construction contracts.
The group is in the process of disposing of non-core assets.
The mess the group found itself in was laid bare in March when it released its year ended December results. It reported a net loss after tax of R1 billion for the 2017 financial year.
At year-end, the group’s current liabilities of R2.1bn exceeded its current assets of R1.4bn while it had cash of just R126.4million.
The group’s auditors, PricewaterhouseCoopers, in the financial statements said “there is a material uncertainty on the timing of cash flows that may cast significant doubt on the group and company’s ability to continue as a going concern...”
In its attempt to stay afloat, the company’s board in September last year approved a turnaround plan that saw it dispose of surplus plant and equipment and generate a cash inflow of R80m into the business.
Bridge funding of R150m was also obtained from the Industrial Development Corporation (IDC), which was subsequently repaid in March.
The group further managed to successfully raise additional funds amounting to R300m through a rights offer process.
The proceeds from the rights offer were used to improve working capital and settle the IDC bridge loan.
Aeon Investment Management chief investment officer Asief Mohamed said it was not surprising that a construction company had gone into business rescue.
“A slowdown of building, roads and mining contracting after the 2010 World Cup is a contributory factor.
"Collusion probably over many years had allowed construction companies to make excessive profits, which they can’t anymore,” Mohamed said.
Basil Read, WBHO construction, Group Five, Murray & Roberts Holdings and Stefanutti Stocks Civils were found to have colluded in 2006 to allocate tenders on Fifa World Cup stadium projects and agreed on a 17.5percent profit margin.
The government then reached a settlement compelling the companies to pay a total of R1.5bn towards developmental projects.
The distress in the construction industry has been evident in the listed companies' share price performance this year.
Aveng, which once had a market capitalisation of R40bn, has tanked 90.7percent in the last six months, valuing the group below R70m, while Group Five, which recently successfully finalised bridging finance with some creditors, has plunged 86.13percent.
WBHO has grown 1.43percent, valuing the group at nearly R10bn, while Stefanutti’s share price has strengthened 8.1percent since the start of the year.
Murray & Roberts, which sold its southern African infrastructure and building business for R314m last year, has seen its stock surge 62.43percent in the period.
- BUSINESS REPORT