As part of an effort to recapitalise its struggling department store chain, South Africa’s Edcon has secured 2.7 billion rand ($191 million) in new cash and rent deductions.
Edcon, which is the owner of Edgars and stationary retailer CNA, has been grappling with its debts for several years, after troubles in its credit business in 2014 coincided with an economic slowdown and weak consumer spending.
The Chief Executive Officer of Edcon, Grant Pattison said the company needed 3 billion rand ($226 million) in financing over the next three years to allow it time to improve its business. The company competes for market share with TFG, Truworths and international chains such as Zara and H&M, and is one the biggest names in South African retail, employing more than 14,000 full-time staff in over 1,100 stores.
Edcon has asked landlords to reduce rent in exchange for equity in the company and has been in talks with lenders and other investors about injecting money.
Speaking on the deal with the company’s secured lenders, the government pension fund and landlords, Pattison said “this is a significant step forward towards ensuring the restoration of our balance sheet and putting the company back on the path to success. It will provide management with a sufficient time-frame to implement the store estate restructure and focus on returning the business to profitability”.
Edcon said the recapitalisation will result in the removal of all of its interest-bearing debt and also introduce a new group structure and set of shareholders. The company noted that the shareholders will consist of Edcon’s existing lenders, the Public Investment Corporation and participating landlords of Edcon, as well as Edcon’s employees, once all conditions have been finalised.
The Southern African Clothing and Textile Workers’ Union welcomed the announcement, saying in a statement that the agreement means “a job massacre has been averted in the local clothing manufacturing industry”.