Horse-racing collapse takes Phumelela to the brink

Phumelela Gaming and Leisure is in talks to raise R300 million ($16.3 million) to stave off collapse as South Africa’s measures to contain the Covid-19 coronavirus curtail horse racing and other sporting events.

According to people familiar with the matter, who asked not to be identified as the details of the terms are private, talks with a capital provider and banks are under way to salvage at least part of the business.

The Johannesburg-based company has been unable to stage events since the government banned large gatherings in mid-March.

If Phumelela can’t raise the money, the board will have to decide “whether there is any reasonable prospect that the group’s business can be rescued, or whether to make application for voluntary liquidation”, the group said in a statement on Monday.

Efforts to reach the company for comment on the multimillion-rand target went unanswered.

Phumelela isn’t alone in facing the prospect of liquidation owing to the Covid-19 crisis.

Edcon Holdings last week filed for administration after the second-largest clothing retailer in South Africa lost R2 billion in sales and failed to pay suppliers as a result of a five-week strict lockdown.

Companies with high debt levels are taking the most strain. Phumelela’s net debt-to-equity ratio, including lease assets, is at 38%, it said in the statement.

Phumelela, which used to count former Steinhoff International Holdings chief executive Markus Jooste as a director and among its largest shareholders, had already started cutting jobs amid a horse racing industry slump.

Its stock has tumbled 94% since the start of last year, leaving the company with a market value of less than R75 million, and traded 8.8% lower as of 9:12am on Tuesday.

Get in touch  City Press

+27 11 713 9001 news@citypress.co.za Media Park, 69 Kingsway Road, Auckland Park

Rise above the clutter | Choose your news | City Press in your inbox

City Press is an agenda-setting South African news brand that publishes across platforms. Its flagship print edition is distributed on a Sunday.