In October last year it failed to pay R56.2million to Absa Bank as part of a cross guarantee for its subsidiary Escor Construction
In a business rescue update, it said the company did not have available funds to honour its obligations as the assets were illiquid in the form of investments and a debit loan account from construction that was currently not recoverable.
However, it said in order to mitigate the negative effects, the directors had implemented various strategies to ensure that the company was able to meet its obligations as and when they fell due.
The strategies included starting negotiations to dispose of certain development land, and ensuring that adequate security was provided to the primary bankers to cover the facilities that were made available in terms of the facilities arrangements.
The JSE-listed Esor said soon after their appointment the business rescue practitioners (BRPs) engaged with the guarantors, the shareholders and Absa Bank and focused their attention on stabilising the company.
Esor said the company’s liabilities at the commencement of business rescue could be as high as R597million, while the estimated forced sale value of the company’s assets was only R122.7m.
The company said the business rescue practitioners, which the company has agreed to pay R2000 per hour, were of the view that there was a reasonable prospect to develop and implement a business rescue plan for Esor that would ensure it continued in existence on a solvent basis.
“But this will require a reorganisation of the financial affairs of the company and a consequential arrangement between the company and its creditors regarding its liabilities.”
Esor’s reasons to voluntarily place the company in business rescue reportedly included significant losses incurred on certain construction contracts in the current and prior years, it owing its creditors an estimated total amount of R130m, the current challenging economic environment within the construction sector in the country, and the inability of the company to obtain further short to medium-term funding.
Yesterday, Esor said the business rescue practitioners had engaged with the shareholders, on the requirements of resuscitating the company or its business.
“The BRPs have critically assessed all the options available in order to restructure either the company or its business.”
Market intelligence firm Industry Insight said this week that the latest company results monitoring service index compiled by Industry Insight revealed that the overall index was driven down by all segments of the listed construction sector.
- BUSINESS REPORT