Sale of Edgars, Jet, Thank U Digital Services on the cards as Edcon fights for survival
JOHANNESBURG – Edcon's business rescue practitioners (BRPs) have proposed the sale of the ailing company’s three remaining brands by the end of the month to keep it alive for the upcoming summer sales season.
Piers Marsden and Lance Schapiro said in their business rescue plan published on Monday that they were in the process of selling Edgars, Jet and Thank U Digital Services as going concerns. They said they had considered restructuring or the outright sale of the business in an effort to rehabilitate Edcon, but opted for selling, as raising funding for the group had become difficult.
“It is imperative that an accelerated sales process yields results prior to the end of June in order to provide sufficient lead time for supplier negotiations to be finalised and procure summer stock. Without this, the business will likely fail in the summer due to a lack of product to sell,” said the BRPs, who were appointed last month after the coronavirus-induced lockdown restrictions brought Edcon to its knees.
The BRPs said 19 parties initially expressed interest in participating in phase one of the accelerated sales process, but only 15 met the requirements.
They said the remaining parties were invited to participate in phase two of the sales process as preferred bidders for the binding offer submission deadline at the end of the month.
Trade unions, lenders and creditors were scheduled to approve the plan by June 15.
“It is clear that it is in the best interests of all stakeholders to proceed with this business rescue plan, which fundamentally seeks to obtain the sale of the business and/or its divisions, importantly contributing to job preservation and business continuity,” the BRPs said.
“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.”
The BRPs also proposed winding down the brands sold through an auction or any other manner appropriate.
They anticipated revenue of R786 million for June. An average of R80m in inventory would be purchased a week, and store rental based on turnover had been negotiated.
Edcon operates 650 stores and employs 17 292 employees and 5 000 casual workers. Last year, the group’s debt was restructured following a lifeline from its lenders, landlords, and the Public Investment Corporation.
However, Edcon became financially distressed due to the recession that coincided with load shedding, which returned at the end of last year. The national lockdown, which included 45 days, resulted in the immediate R2 billion loss and made it impossible for the company to meet its obligations with suppliers.
The BRPs warned that the business rescue process had risks that needed to be considered and accounted for, including uncertainty surrounding trading conditions due to the lockdown and deteriorating market conditions.
They said staff had been paid in April and May and that the company was expected to make the June salary payment.