Edcon creditors approve business rescue plan

Gallo Images/ER Lombard

Creditors of Edcon have approved the business rescue plan for the clothing retailer after deliberations on Monday night, Fin24 understands.

When approached for confirmation from Edcon, a spokesperson said that the process was still underway and official comment would only be given on Tuesday.

Earlier on Monday, two concurrent creditors of Edcon lost an urgent application in the High Court in Pretoria to have the creditors' meeting, which was set to start at 14:00, postponed.

After numerous attempts over the years to turn Edgars and other brands like Jet around, Edcon went into voluntary business rescue at the end of April this year. Even before SA moved into lockdown at the end of March, Edcon was already under strain.

Last year the Public Investment Corporation, landlords and creditors funded a R2.7 billion recapitalisation deal that enabled the company to keep operating.

The business rescue practitioners, Piers Marsden and Lance Schapiro, opposed the urgent application by Edcon suppliers Kingsgate Clothing and Clematis Trading on Monday morning. The urgent application was struck off the roll due to the court finding a lack of urgency. This cleared the way for the creditors meeting to take place in the afternoon.

Edcon owes Kingsgate about R24 million and Clematis about R18.5 million. The first meeting of creditors took place on 18 May 2020.

Clematis claims in court documents it was informed at some stage that concurrent creditors could expect about 50c in the rand if the rescue plan is adopted. However, Clematis claims that, when the plan was published on 9 June, it anticipated only 4c in the rand for concurrent creditors.

'Hellbent' on rescue

In opposing the application, the practitioners pointed out that Kingsgate and Clematis represent claims of less than 0.6% of the total amount of creditor claims against Edcon of R8.1 billion.

"The practitioners appear to have some agenda they are not disclosing to the concurrent creditors. They seem hellbent on pushing through an acceptance and approval of the rescue plan. Whose interests are they serving?" Kingsgate asks in its court application.

"They say there are more parties interested as buyers for Edcon and or one or more if its divisions, but they will not disclose who it is nor the amount the interest involves."

According to Kingsgate there is concern among concurrent creditors "that the entire restructuring of Edcon during 2019 was done in a manner to protect shareholders in the holding company who have lent monies to Edcon through the holding company or companies".

Kingsgate further claims that many of the concurrent creditors have reservation of ownership over their goods or have sold to Edcon on consignment.

"The sense of the concurrent creditors have in the absence of information and documents is that Edcon and or one or more of its divisions is being prepared for a suitor on a silver platter," claims Kingsgate.

The applicants also question how Marsden can be handling the rescue process from Canada. They suggest that maybe a forensic audit is needed on Edcon in business rescue.

"Without all the financial and other information the applicants have not been placed in a position to determine whether or not they ought to vote for or against the implementation of the plan or even propose amendments thereto," they state in their court documents.

*Update: This article was updated at 21:00 on Monday, 22 June to reflect that the business rescue plan was approved.

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