June 22, 2020 / 10:04 AM / 24 days ago

Edcon creditors go to court to halt restructuring meeting

JOHANNESBURG, June 22 (Reuters) - A group of creditors of South African retailer Edcon has made a court application to halt meetings scheduled for Monday to consider a proposed restructuring plan for the company which is under bankruptcy protection.

Edcon, which owns department store chain Edgars and budget retailer Jet, entered a form of bankruptcy protection in April after its sales were hit after the coronavirus crisis lockdown.

Edcon, which opened its first Edgars store in Johannesburg in 1929, had already been struggling due to falling local demand and slow economic growth in South Africa.

Administrators in charge of Edcon are proposing a sale of parts or all of the company and about 15 parties have shown interest in the sale.

The administrators said on their website that the application to halt Monday’s meeting would put the Edcon sales process and jobs at risk. It said the sale needed to be finalised by end-June to allow time for supplier negotiations to be concluded and for summer stock to be purchased.

The creditor group - Durban-based Kingsgate Clothing and Clematis Trading - filed the application with a high court in Pretoria on Friday, documents on Edcon’s administrators’ website showed.

In the application, the creditors said that Kingsgate and its associate companies were owed 24 million rand, and Clematis about 18.5 million rand by Edcon.

Kingsgate CEO Yusuf Vahed said in the application that between May 18 and June 8, when the restructuring plan was published, Clematis CEO was advised by Edcon that they could anticipate a potential liquidation dividend of about 50 cents on the rand if the rescue plan was adopted.

“When the concurrent (unsecured) creditors saw the plan, they were totally shocked and startled to see that what was being suggested was an anticipated dividend to them of 4 cents in the rand,” the creditor group said.

Vahed said this would mean Kingsgate, a clothing manufacturer, and its associated companies, would recover only about 960,000 rand. Vahed also said if this was the case then it was keen to convert its debt into equity.

Lance Schapiro, one of Edcon’s administrators, said the meetings should proceed as scheduled later on Monday.

“Creditors will be given the opportunity to amend or adjourn the meeting,” Schapiro said on the website.

The total amount owed to Edcon’s creditors is approximately 8.1 billion rand ($465.60 million), the documents published on the administrator’s website said. ($1 = 17.3970 rand) (Reporting by Nqobile Dludla. Editing by Jane Merriman)

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