South Africa's Edcon secures R2.7 billion cash from public and landlords
To save the country's largest retailer from liquidation.
South African department store chain Edcon said on Friday it has secured R2.7 billion in new cash and rent deductions from its secured lenders, government pension fund and landlords as part of a recapitalisation programme.
Edcon, which owns clothing retailers Edgars and Jet, stationery retailer CNA, has struggled to survive South Africa’s retail market, which has seen intensified competition from international retailers Zara and H&M and consumer spending that is in the doldrums.
Since December 2018, Edcon has been in talks with its funders and landlords to give it breathing room and fight off the worst-case scenario of liquidation.
Edcon is one the biggest names in South African retail, employing more than 14 000 full-time staff in over 1 100 stores.
In January, Edcon’s chief executive Grant Pattison said it needed R3 billion in financing over the next three years to allow it time to “fix” its business.
Grant’s attention will now turn to restoring sales growth at Edgars, Jet and CNA. Edcon has been closing shops and reducing floor space, and “numerous other strategic initiatives are underway,” Grant said in the statement.
“There was encouraging progress over the festive and back-to-school trading periods,” he said. “Reassuringly, our credit sales growth has exceeded our cash sales growth for the past several months, and the number of active accounts has increased for the first time since 2012.”
The restructuring of Edcon brings on board the Public Investment Corporation, which manages pension savings worth R2 trillion on behalf of government employees. The restructuring also brings in real estate companies that have injected equity in the company. For example, Redefine Properties contributed R54.6 million of equity agreed to rental reductions of as much as R13.8 million.