Troubled retail group Edcon gains some breathing space

Johannesburg-based Edcon Holdings Ltd., which operates the Edgars chain of clothing stores, has been given approval by its creditors to implement a recapitalisation plan. The bulk of the company´s 1,500 stores are in South Africa, but it has 169 outlets in other African markets, including Botswana, Ghana, Mozambique and Zambia.

The 89-year-old company was acquired by US private equity firm Bain in 2007, which, following a series of missteps, relinquished control to its creditors in 2016. Apart from falling sales amid a struggling domestic economy, the rise of internet retail and its failure to keep up with changing tastes, Edcon’s major problem is that its debt repayments have ballooned as the foreign-exchange value of the rand has dropped: Its outstanding debt rose by two-thirds, from ZAR4.2 billion to ZAR7.0 billion (USD507 million), during the 12 months to June 2018.

Edcon is planning to reduce its floor space by 17% over five years and has reportedly asked 31 landlords in South African malls for a 41% rent reduction over two years in exchange for 5% of its equity. Edgars is an anchor tenant in many of these malls. Management is also seeking a combined ZAR2 billion (USD145 million) in “emergency funding” from its current owners and the state-owned Public Investment Corp.

 

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