May 28, 2015 / 10:42 AM / 3 years ago

Edcon mulls asset sale, debt refinancing as sales drop

JOHANNESBURG, May 28 (Reuters) - South African retailer Edcon is considering selling non-core assets to make repayments on its debt, the company said on Thursday while announcing weaker sales.

Taken private in a highly leveraged buyout by Bain Capital in 2007, Edcon said sales from comparative stores fell 3.9 percent in the fourth quarter to March 28 versus the comparable period in the previous year.

Credit sales fell 8 percent for the year to March as consumers in Africa’s most advanced economy grapple with growing debt levels, high unemployment and rising electricity costs.

Edcon, which operates Edgars, CNA and Jet stores, said it has been advised by international investment banks on how to refinance upcoming maturities and was in talks with interested buyers for a number of its non-core assets.

CEO Jürgen Schreiber however told reporters that he does not foresee an announcement soon on the proposed asset sales.

The retailer said it has entered into discussions with its bank lenders and 2019 noteholders about new debt financing and transactions involving its debt but did not give details.

Concerns grew about Edcon’s ability to repay bondholders after Morgan Stanley published a note in September supporting a short position of the company’s debt, saying the capital structure was “unsustainable”.

Edcon said in February it was carrying out a cost-saving drive that may result in job cuts at its head office, a move that would reduce operating costs and help it improve margins further as consumer spending remains sluggish.

Schreiber, who will step down as CEO in August to join a non-South African company, said that Edcon is not planning any new major restructuring that could result in job losses. (Reporting by TJ Strydom; Editing by James Macharia)

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