Edcon Business Rescue Update

The appointed Business Rescue Practitioners (BRP’s), Messrs. Piers Marsden and Lance Schapiro, published the Edcon Business Rescue Plan (“the Plan”) on the 8th of June 2020, after meetings and consultation with the Creditors, Landlord and Employees Committees, and communication with SACCAWU.

The Plan has been prepared on an “accelerated sales process” basis, as interest to invest in or provide funding to the company has not been forthcoming, and the securing of post commencement finance (PCF) not currently imminent. The key priority and intention of the sales process is to secure the sale of the Business and/or its Divisions as going concerns, which most notably will involve the transfer of some of the employees, resulting in a significant number of jobs being saved at Edcon.

According to the Plan, a significant number of parties who expressed interest in the sales process will move to the “due diligence” phase. The interested parties are required to submit their final binding offers by the end of June 2020, with the acceptance of the successful binding offer set to be finalised by early July 2020. The Plan is scheduled for approval by the affected persons on the 15th June 2020 in compliance with the Companies Act.

The company has paid salaries to staff in the months of April and May and is expected to make the June 2020 salary payment. The Practitioners can confirm that the payment of salaries will continue to be a priority during the business rescue period, subject to trading conditions and continued support being received from the TERS and UIF processes.

The BRP commented, “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. 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 Plan, according to the Practitioners “does have risks that need to be considered and accounted for, including but not limited to the uncertainty surrounding the economic trading conditions due to COVID-19, deteriorating market conditions, budgeted sales figures not being achieved as well as any discrepancies in asset and inventory registers, expected realisation of stock and assets, as well as any unforeseen business rescue or liquidation related litigation and damages claims. If the implementation of the plan is not possible and does not take place, then this would result in the immediate liquidation of the company”.

At this stage however the Practitioners believe that all indications point to the Plan serving to rescue the Company by accepting and implementing the proposals of the Plan, and in so doing, will balance the interests of all stakeholders.

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