Harare – Debt-laden South African retail giant Edcon said it needs 3 billion rand ($226 million) in funding over the next three years to “fix” its business.
Edcon has been grappling with an over-leveraged capital structure for several years, after troubles in its credit business in 2014 coincided with an economic slowdown and weak consumer spending at home.
Chief executive Grant Pattison told reporters in Johannesburg on Thursday that the Company is making progress toward securing 3 billion rand ($226 million) in funding to keep the South African clothing retailer afloat, with the Public Investment Corp part of the ongoing talks.
“The approval process is moving forward. There’s no reason to believe anything is moving off track.”
According to reports, the PIC, Africa’s biggest money manager, may provide 1.8 billion rand to assist the company.
The owner of brands such as Edgars and Jet employs about 21,000 employees in a country where more than one in four people don’t have jobs, and is struggling with a depressed consumer environment and the fallout of a debt-fuelled takeover in 2007. Banks and bondholders took control in 2016 to avoid the retailer failing.
Pattison said Edcon is closing stores and reducing floor space while the talks progress, adding that the 3 billion rand will give the company three years of breathing space and help it achieve a profitability goal in the third of those, he said.
Recently, Edgars Stores Limited (EDL) shareholders approved the acquisition of trademarks to brands owned by Edcon in exchange for an increased stake in the company.
The transaction will see Edcon increase its shareholding in EDL from 38,07 percent to 41,07 percent, through its 100 percent owned local outfit, Bellfield Limited.
Edgars and Edcon agreed to settle the purchase consideration of the franchise brands for $1,5 million through the issuance of 15 000 000 EDL ordinary shares.
This is expected to reduce Edgar’s costs associated with paying franchise fees for Jet and Edgars brands and other Edcon trademarks and brands that it operates locally.
In a statement issued on January 22, 2019, EDL secretary Buhle Mpofu said the resolution was passed and now awaits exchange control approval from the Reserve Bank of Zimbabwe and approval of the listing of ordinary shares on the Zimbabwe Stock Exchange (ZSE).
Equity Axis News