Group Five plans to begin offloading assets to keep afloat
The group, which was placed in business rescue last month, said the sale of its assets came after other refinancing options failed to yield any results.
Business rescue practitioners Peter van Steen and Dave Lake said on Friday that Group Five remained financially distressed, with liabilities that materially outweighed its current assets.
The two said the imbalance was being addressed through a moratorium on pre-business rescue creditors, funding to be provided by a consortium of lenders once the business rescue plan was initiated, negotiations with counterparties, and the disposal of a number of different assets to a multiple of “potential arm’s-length purchasers”.
Group Five and a key subsidiary, Group Five Construction, were placed in business rescue last month, and its listing on the JSE was suspended at 89cents a share. The group joined other industry heavyweights that fell into liquidation last year, such as NMC Construction, Basil Read, Esor Construction and Liviero Group.
Van Steen and Lake said the disposal of assets would help to reduce Group Five’s liabilities, and meet its lending obligations and working capital requirements during business rescue proceedings.
They said the JSE would be notified monthly, but warned that because the offloading was urgent and alternative methods of financing had been exhausted, there would be no time for shareholder approvals.
The business rescue practitioners could not disclose the assets that had been targeted for disposal and who the potential buyers were.
In another development, Group Five said that its creditors had approved the extension of the date of publication of a business rescue plan to June.
The group said it would not publish its results for the six months to December 31, 2018, by the end of March this year, as was required by the JSE listings requirements, due to the business rescue proceedings.
Group Five directors estimated that the company would need R3.6billion to fund working capital requirements up to December, including the repayment of the bridge funding facilities, meeting its other lender related obligations, and paying severance pay for retrenched workers.
An Industry Insight Construction Industry Forecast Report published last Thursday said that the severe decline in civil engineering and construction sector activity, mainly due to cutbacks on government infrastructure spending and weak economic growth, was likely to continue to slide over the next 12 to 18 months as the country “hopefully” approaches the bottom of an economic cycle.
The report described the civil engineering and construction tendering environment as depressed throughout the different grades of projects, with small, medium and large projects few and far between.