Thousands of jobs on the line as Edcon staff wait for details of purchase deal
About 43,000 Edcon employees - including 22,000 who have already been served with notices of possible retrenchment - remain jittery as they wait to see if a potential buyer of “some” of the retail giant’s divisions will materialise.
On Monday, about 1,000 affected people, including employees, landlords, suppliers and other creditors, took part in a virtual hearing at which a business rescue plan was presented and approved.
The meeting went ahead after Pretoria high court judge Selewe Mothle refused to hear an application by two unsecured creditors, Kingsgate Clothing and Clematis Trading, who were seeking to stop it.
They said the business rescue practitioners (BRP) were “steamrolling” the plan, which proposed they would only get four cents in the rand for the R42.5m they were collectively owed.
Mothle ruled the matter was not urgent.
Addressing the meeting, BRP Piers Marsden repeatedly declined to disclose details of the “retailers” who were interested in purchasing Edgars, Jet and Edcon’s financial services divisions. He said this would “contaminate the process” and could affect the markets.
He said out of 19 expressions of interest, 15 had complied with the first phase of bidding requirements.
“We are asking for binding offers to be delivered by the end of this month. Then we will come back to the [affected parties] committees. But because of the competing interests of the committees, we will have the authority to make the final decisions.”
If approved, he said the rescue plan envisaged a sale, or sales, in July, and a “winding down” of any divisions not bought after August.
Marsden said because there was no post commencement finance available after Edcon went into business rescue in April, it was essential that the plan be approved as soon as possible, to allow trading to continue and summer clothing orders to be placed for December.
Otherwise, he said, this would deter buyers and the company would undoubtedly be put into liquidation, which would result in stores shutting immediately, massive job losses and the prospect that creditors would get virtually nothing.
He said no formal valuation had been done on the company “because when it changes from a going concern to a breakdown scenario, it really depends on what people are prepared to offer”.
A spokesperson for the South African Clothing and Textile Workers' Union (Sactwu) said it “threw its weight behind” the rescue plan, as did a representative of non-unionised staff.
Marsden said he believed there was “every chance of doing a sale, but the potential buyers are also concerned about what a Covid-19 trading world will look like, what the economy will look like”.
“We also have very constrained timeframes ... and there is always a risk that sales fail. It’s a large business with a history of losses. And they [the potential buyers] are existing retailers grappling with their own issues,” he said.
Asked by suppliers how they would survive if they only got 4c in the rand, Marsden said: “There is going to be a knock-on impact, but we cannot get blood from a stone. We have been through all the alternatives. It’s this or liquidation.”
He said ultimately they might get 6c in the rand “or even slightly higher” - any dividends should flow from September, if the sales went ahead.
He said “debt for equity” - as proposed by Kingsgate and Clematis - was not a viable option because of the short timeframes to rescue the business and the need to “get liquidity”.
A proposal that voting be delayed was not supported by the majority of creditors.