Edcon files for bankruptcy protection

Edcon Holdings, South Africa’s second-largest clothing retailer, filed for administration after losing R2 billion in sales and failing to pay suppliers due to the country’s strict lockdown rules that were put in place to contain the Covid-19 coronavirus pandemic.

Shops selling anything other than food or medicine were ordered to close almost five weeks ago, with the easing of some restrictions due to kick in on Friday.

The owner of the Edgars and Jet chains has exhausted cash supplies and, while stores will open on Friday, the company will operate under a local form of bankruptcy protection, Edcon said on Wednesday.

“We will be working closely with the appointed business rescue practitioners, shareholders and government to find a way to plug the financial hole,” chief executive officer Grant Pattison said.

“It is my hope that some version of the business will emerge to continue to serve customers.”

READ: The reason Edcon is still going? ‘Not a single person wanted the deal to fail’

Edcon warned last month that it may not be able to outlast the lockdown, even after securing R2.7 billion from lenders, landlords and the Public Investment Corporation in a 2019 restructuring plan that freed the retailer of all interest-bearing debt. The company has about 18 000 staff, and its suppliers employ many more.

Edcon isn’t alone as similar crises play out around the world due to Covid-19. Earlier this month, struggling UK clothing retailer Debenhams sought to be taken over by administrators, a move to avoid being pushed into liquidation after closing stores. Retailers globally have asked landlords for leniency during a period where they will generate little or no revenue.

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Edcon’s most recent restructuring came two years after Bain Capital Private Equity handed the company to creditors following an ill-fated buyout 10 years earlier. Pattison, formerly of Walmart-owned Massmart Holdings, was appointed to work on a turnaround strategy and, in Wednesday’s statement, said Edcon had been on track with its business plan through December.

The business rescue proceedings will be handled by administrators Piers Marsden and Lance Schapiro.

– Bloomberg

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