Companies / 1 September 2019, 6:27pm / Edward West
CAPE TOWN – Group Five, formerly one of South Africa’s biggest construction groups, may only be able to save 3 500 jobs at its Group Five Construction (G5 Construction) subsidiary through its business rescue proceedings, a statement said Friday.
Group Five was the latest of a number of construction groups to hit financial difficulties when it was placed in business rescue on March 11, 2019. The sector has been hit by slow infrastructure spending and low levels of private sector capital investment. Dave Lake and Peter van den Steen were appointed as business rescue practitioners on March 13.
They said in a statement on Friday they hope to save between 3 000-3 500 jobs at G5 Construction, albeit under new ownership. At the time of going into business liquidation, the broader group had more than 7 000 employees.
Explaining the benefits to creditors of going through the business rescue process, as opposed to liquidation, they said the shortfall of creditors was expected to be R5 billion better through the business rescue process, when compared with liquidation.
“The business rescue practitioners (BRPs) today (Friday) released the business rescue plans for (G5 Construction) and for Group Five Limited (G5 Limited). Voting on the business rescue plans will take place in consecutive meetings on September 11,” they said.
G5 Construction represents the majority of the businesses, claims and recovery value within the greater Group Five group of companies.
On G5 Construction, the business practitioners said: “”We remain confident that a successful business rescue will balance the rights and interests of all relevant stakeholders.”
The BRPs had successfully secured funding from the lender banks to provide operational solvency during the business rescue proceedings, and to ensure that asset sale value realisations are optimised and losses from projects minimised.
Wherever possible, subsidiaries and operating divisions of G5 Construction have, or were being restructured and disposed of to new ownership, for fair value, on a solvent basis and as going concerns, the business practitioners said.
“Where this is not possible, a controlled wind-down of the relevant subsidiaries and companies – as well as the head office of the company – will be implemented,” they said.
All other assets (financial or otherwise) were being vigorously pursued and/or disposed of in controlled disposal processes.
“There have been no fire sales of assets and companies and we will not make any fire sales in future. We are engaged with our construction clients to minimise disruptions in those projects. We also continue to carefully manage group costs and to reduce them in accordance with the diminishing requirements of the company,” they said.
On successful implementation of the business rescue plan, secured creditors were expected to receive distributions of between 66-78 cents in the Rand – relative to 18 cents forecast in liquidation.
Concurrent creditors were expected to receive distributions of between 9-20 cents in the Rand, relative to 3.4 cents forecast in liquidation.
G5 Limited’s assets comprise shares in Everite and Group Five Construction. The consolidated balance sheet in the management accounts of G5 Limited, as at February 28, 2019 confirmed it had total liabilities in excess of R6 billion.
“The only asset that will realise proceeds for G5 Limited is that of Everite. This business is currently being disposed of in a controlled sales process…. the lender banks will be the only recipient of the proceeds derived from the sale of Everite,” they said.
G5 Limited would not realise any recovery from the business rescue proceedings of its primary subsidiary, Group Five Construction.
It was not anticipated at this time, that there would be any return to the shareholders of Group Five Limited, which would be wound up and delisted in time.