PIC supports Edcon business rescue plan as adopted by creditors
JOHANNESBURG – The Public Investment Corporation (PIC) said on Tuesday that it supported Edcon’s business rescue plan (BRP), which was adopted by more than 75 percent of Edcon's creditors on Monday.
The PIC, which invested R1.2 billion in Edcon on behalf of the Unemployment Insurance Fund last year, said although it was probable that jobs would be lost, support of the business rescue plan aimed to minimise job losses and maintain footprint of Edcon’s retail entities to ensure support for landlords.
“The PIC is therefore in favour of the plan versus a liquidation process, which would have a higher impact on job losses,” said the PIC, Africa’s biggest investment fund.
The PIC said that it was aware of court challenges to the BRP and hoped for a lasting solution, that was beneficial to all the stakeholders and ensures that as many jobs as possible are preserved.
“By March 31, Edcon employed more than 24 400 people. The majority of these jobs, 80 percent, or more than 19 400 are permanent, with 58 percent, or more than 16 400, being employees aged 35 years and under,” said the PIC.
On Monday, Edcon’s business rescue practitioners, Piers Marsden and Lance Schapiro, said that the sales process of the company’s subsidiaries, Jet, Edgars and loyalty programme Thank U, was progressing well. Edcon has had various offers to purchase its divisions, and the BRPs said its survival depended on a sales process, as no bank finance has been provided.
They said that interested parties were currently completing their due diligence, with “binding offers” set to be received by the end of the month.
The BRPs said the business rescue plan was approved on Monday by the majority of affected parties, including employees, creditors, lenders and landlords, with support for the plan received from the South African Commercial, Catering and Allied Workers Union (Saccawu) and the Employee’s Committee.
The BRPs said that both the employee committee and Saccawu representatives supported the plan, indicating that it would ensure the preservation of jobs, ensuring future business continuity and ultimate support for the South African economy.
“The representatives indicated that liquidation is not a consideration and the rejection of the plan in this current economic and unemployment context would have a detrimental impact on all stakeholders,” said the BRPs.
The BRPs also said the plan would not only offer greater gains to employees and creditors, but would ultimately serve to contribute to the greater economy.
“Not only will jobs be saved, but employees will also receive better severance, in the likelihood of some employees being retrenched.
"Creditors and landlords will also be in a better position as they will not only receive better dividends, but the sale will also provide them with sustainable customers to ensure continued trading”.
Last week, Edcon served 22 000 employees with Section 189 notices, which are an invitation for consultation on the company's restructuring.
“The approval of the plan is the start of a complicated and rigorous process that comes with risks and challenges that need to be considered, including and not limited to the execution of the final sales agreements, uncertain and deteriorating market conditions, as well as any unforeseen business rescue or liquidation related challenges,” said the BRPs.