Johannesburg - Edcon, South Africa’s biggest clothing retailer, which was taken over by creditors last month, said on Monday that conditions of the debt-to-equity swop had been fulfilled, making way for the restructuring.
The announcement signalled that the last technical steps in the debt-for-equity swop had been completed, analysts said.
“The Edcon Group will now proceed to implement the restructuring pursuant to the terms and conditions of the lock-up agreement,” Edcon said.
Restructuring
The $1.5 billion (R21.4bn) debt-to-equity swop entailed that Boston-based Bain Capital, Edcon owners since 2007, exited the group to make way for creditors, including Franklin Templeton of the US.
The debt-to-equity swop has reduced the Edcon’s debt to R6bn from R26.7bn.
Edcon has lost market share to competitors, including Woolworths, after making significant mistakes including prioritising international brands at the expense of in-house labels. Edcon said it now planned to exit 25 of its 37 international brands.
Ron Klipin, a portfolio manager at Cratos Wealth, said Edcon could be on the road to recovery as it had effectively de-geared its balance sheet by converting a large chunk of debt-to-equity and would be looking to rid itself of non-core assets in due course.
“If it can turn around its onerous brands like CNA and Boardmans it may help to speed the path to recovery. However, only time will tell whether it will be able to claw back lost market share with consumer spending under severe strain owing to the tough economic climate,” Klipin said.
Edcon chief executive Bernie Brookes said last month that the company had been “living beyond its means”.
He said the company faced a bleak future and had two options - either to go into business rescue or be taken over by bondholders.
Brookes announced plans to sell the Legit brand to Retailality for R637m, but said there were no plans to sell CNA and Boardmans.
Edcon said it planned to increase its workforce by almost 7 percent and slash prices as part of its recovery.
Edcon, which owns Edgars and Jet, is seeking to lure customers back to its stores with more than 2 000 new staff specifically trained in the clothing ranges in their departments.
* With additional reporting by Bloomberg
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