Stationery retailer CNA is facing a financial crisis, with its board threatening legal action against its controversial CEO and creditors claiming they have not been paid for months.
After only a year at the helm, investment company Astoria announced last week that it sold its stake in CNA Holdings to management.
Astoria had purchased 70% of CNA from Edcon for R1.2-million from Edcon. It said it did not provide any “further equity or debt funding” to CNA.
A director of Astoria told Fin24 that they sold because they “were not able to add any value and the management team thought they could”.
The sale agreement was amicable.
However, the board of CNA is now accusing CEO Benjamin Trisk, formerly of Exclusive Books, of attempting to put the company in business rescue without consulting them, alleging that he submitted documents that show the board agreed to business rescue when they had not.
According to an article in Fin24, Trisk has refuted this claim as “complete rubbish”.
In addition, CNA director Rob Shortt and Trisk have both confirmed that CNA has fallen behind on payments to landlords and suppliers.
Creditors say they are in the dark as CNA battles to avoid business rescue, with one creditor has still not been paid for January purchases. A payment plan proposed by the retailer saw terms of 60 days effectively change to 120 days, subject to cash flow.
Last week, CNA contacted creditors to state that the proposed payment plan would be amended further with part payment now likely at the end of the month. The letter stated that the retailer needed time to put funding in place.
CNA’s stores are not as well stocked as they should be, which may point to the fact that suppliers are no longer providing stock until payments are received.
In the event that CNA does enter business rescue, it is likely that creditors will only receive 4c on the rand.
Edcon has announced that the sale of parts of the Edgars business in South Africa to Retailability (Pty) Ltd has been implemented, with all approvals from regulatory authorities and all conditions precedent either fulfilled or waived.
The sale includes the transfer of approximately 120 stores in South Africa together with the businesses conducted therein.
Retailability, a fashion retailer and a holding company of store brands including Legit, Beaver Canoe and Style, operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and eSwatini.
Retailability aims to ensure that ongoing operational business is its top priority, while integration work is moving ahead vigorously.
“We are pleased that we were able to close the transaction within two (2) months after the announcement. The closure of the transaction underlines the industry fit and the excellent compatibility between Edgars and Retailability’s strategic intent, infrastructure, and value chain. We are pleased by the significant saving of approximately 5,200 jobs as well as the continued commitment to the retail industry, economy, and the sustainability of the South African Edgars brand,” said business rescue practitioners.
The finalisation of the sale in South Africa indicates the achievement of a critical milestone in the Edcon business rescue plan. The parties will continue to co-operate and work towards concluding the sale of Edgars’ businesses in other various jurisdictions in Africa (namely Botswana, eSwatini, Lesotho and Namibia), where various regulatory approvals and conditions precedent remain
The Foschini Group says it has concluded a sale agreement with Edcon for some of the stores and assets of Jet.
The Foschini Group (TFG) has reached an agreement with Edcon’s business rescue practitioners to buy some of its subsidiary Jet’s assets. The fashion retailer first announced over a month ago that it had made a R480 million offer to buy some 371 “commercially viable” Jet stores.
Edcon, which owns Edgars and Jet Stores, filed for voluntary business rescue in April after the nationwide lockdown exacerbated its already dire financial position. In June, its BRPs said the only way to save the company was through an “accelerated sale” of its divisions.
“TFG is pleased to announce that it has successfully negotiated and concluded a sale of assets agreement with Edcon and its Business Rescue Practitioners on 14 August 2020 and on principally the same terms as those set out in the conditional offer,” wrote the company in an announcement published on the Stock Exchange News Service on Monday.
TFG’s conditional offer provided for TFG to acquire the Jet brand, a minimum of 371 stores including a distribution centre located in Durban, as well as certain stores in Botswana, Lesotho, Namibia and Eswatini.
The offer also included the acquisition of at least R800 million worth of stock and property and equipment.
TFG said the sale of asset agreements in Botswana, Namibia, Lesotho and eSwatini stores has not yet been finalised, but is expected to be executed shortly. To conclude the acquisition, TFG is waiting on approval from competition authorities, amended lease terms from landlords, and confirmation from unsecured credit provider, RCS Cards, that it will continue providing credit for Jet customers.
“Based on the positive progress to date, the parties believe that the remaining conditions precedent could be fulfilled by the end of September 2020,” said the company.
By Londiwe Buthelezi for Fin24
The Foschini Group (TFG) says it has submitted a conditional offer to acquire Edcon’s business rescue practitioners to acquire some of the stores and assets of JET.
In the offer submitted on Friday, TFG offered Edcon R480-million to acquire a minimum of 371 commercially viable JET stores.
Edcon, which owns Edgars and Jet Stores, announced in late April that it would file for voluntary business rescue after the nationwide lockdown exacerbated its already dire financial position. In June, its BRPs said the only way to save the company and the jobs of its thousands of its employees was through an “accelerated sale” of its divisions to interested parties.
TFG, which has been growing its local manufacturing capacity, said the proposed deal also comes with JET’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. The company is looking to also acquire JET Club and all existing JET stock of no less than R800-million.
“Edcon’s business rescue practitioners have accepted the terms of TFG’s conditional offer. TFG has been granted exclusivity to negotiate and finalise the terms and conclude the Proposed Transaction,” wrote the fashion retailer in a statement issued on Monday morning.
Analysts have long speculated that JET will probably be one division of Edcon that buyers will find interesting.
The BRPs announced last Tuesday they had signed an agreement to sell parts of Edgars to Retailability, another fashion retailer that owns the brands Legit, Beaver Canoe and Style.
TFG said JET’s brand recognition and market share and would provide it with a strategically important expansion into the “value segment” of the Southern African retail apparel market.
“The proposed transaction enables TFG to acquire selected parts of the JET business, a unique opportunity which previously was not possible and is expected to give TFG significant scale at an attractive price,” wrote TFG.
By Promit Mukherjee for Reuters
Parts of South African retail chain Edcon are likely to be sold to private equity-backed Retailability, administrators in charge of its restructuring said.
Best known as owner of the 91-year-old department store chain Edgars and budget clothing retailer Jet, Edcon is one of South Africa’s oldest retail groups but applied for a form of bankruptcy protection in April.
“Retailability plans to utilise Edgars’ unique value proposition, and large attractive target market, to ensure the growth and continuity,” Edcon’s administrators said in the statement, which was issued on Monday.
Edcon entered a process called business rescue in South Africa after it failed to generate enough revenues as a coronavirus lockdown shut its stores across the country. Less than half the 199 stores that fall under the Edgars stable are deemed viable, say business rescue practitioners.
Its administrators said a transaction with Retailability would save a “significant” number of jobs.
Piers Marsden and Lance Schapiro of Matuson Associates, administrators of the process, said last month that they had identified 15 parties interested in picking up all or parts of debt-laden Edcon.
The statement did not say what Retailability would pay and which parts of Edcon the Durban-based retail chain, which bought Edcon’s young women’s fashion division, Legit, in 2016 for 637 million rand ($37.29 million), would buy.
Matuson Associates and Retailability did not immediately respond to an email seeking comment.
Retailability, which runs two other clothing outlets, Beaver Canoe for men’s fashion and Style for families, has 440 stores and some 2,000 employees in South Africa and neighbouring countries.
These are mainly located outside of big cities where the core if its low to middle income target market exists.
By Londiwe Buthelezi for News24
Troubled clothing retailer Edcon says the reason it sent retrenchment notices to all its staff is because it has not received any binding offers from people interested in buying the company or any of its divisions.
The retail group’s executive of corporate affairs and communications Vannie Pillay said the company sent Section 189 retrenchment notices to 22 000 workers, meaning that jobs of everyone employed by the retailer are on the line – as the owner of Edgars and Jet has approximately 17 000 people employed on full-time basis and about 5 000 seasonal workers.
“We did send notices to all our staff as per the LRA [Labour Relations Act] because we have no binding offers that have been received at this stage. So, it’s the prudent thing to start consultations in terms of Section 189,” said Pillay.
Biggest retrenchment plan yet
Edcon’s move makes it be the biggest retrenchment plan yet that any local company has announced during the lockdown, blaming it on the coronavirus-induced restrictions. For instance, the national carrier, SAA which is also in business rescue said 4 708 jobs were affected when it started retrenchment consultations in March.
Edcon said before going into voluntary business rescue in April that the lockdown caused it to lose about R2-billion in sales and did not see any other way out of its woes. But in the business rescue plan that Edcon published on the 9th of June, its business rescue practitioner (BRPs) envisaged that employees would be transferred to potential buyers of Edcon businesses. At the time, the plan said only unavoidable retrenchments would take place if there are remaining employees who were not absorbed by the buyers after the accelerated sales.
The plan said there was no conclusion to be drawn that people working in “non-viable” stores would “definitely” be retrenched. The BRPs were supposed to get final offers from businesses and parties interested in buying Edcon’s divisions by the end of June and finalise successful bids by early July 2020.
Therefore, it was expected that the extent to which the company would be able to retain jobs would become clearer then. But the business rescue plan did budget R597-million for proposed retrenchments of employees whose jobs the BRPs might not be able to save.
By Jan Cronje for Fin24
Struggling retailer Edcon, which owns owns Edgars and Jet, is set to commence with voluntary business rescue proceedings according to a letter sent by its CEO Grant Pattison to creditors and suppliers.
The letter is dated 29 April.
In the letter, Pattison writes that about R2bn in lost sales due to the nationwide lockdown caused by the coronavirus pandemic had consumed the group’s remaining cash.
The R2.7 billion in cash provided to the retailer during its last restructuring had been “substantially utilized” in funding the losses for the financial years ended March 2019 and 2020.
In a separate statement on the group’s website, Edcon states that while company stores will open on May 1 and trade in line with the “level 4” government regulations, they will have do so under business rescue.
“This decision was made in the best interest of our company and all our stakeholders. In the short time that has been available to us, we have been unable to raise the funds needed to pay the creditors for the March and April month-ends.”
“In this circumstance, South African law requires that the company either be placed in liquidation or business rescue. To provide us with a longer period to raise the money, the board has taken a decision to file for business rescue.”
The embattled Edcon Group has announced the sale of CNA to a consortium of investors led by JSE-listed Astoria Investments.
The buyout is led by Jan van Niekerk, who heads asset manager RECM and Calibre (RAC) together with Piet Viljoen. RAC took control of Mauritius-based Astoria last year.
The appointed team leader is Benjamin Trisk, who was the CEO of Exclusive Books.
All of the 167 CNA stores, along with the brand, will be sold as part of the transaction, which still needs to be approved by the authorities.
The transaction value was not disclosed, but the sale includes CNA staff, stock, fittings and leases. Trade creditors and other debt will remain with Edcon.
Edcon CEO Grant Pattison explains: “Edcon has a simple business model that is focused on delivering an enhanced customer experience, and an optimised store portfolio, ultimately creating a focus on our three divisions: Edgars, Jet, and Thank U.
“As I have always said, CNA is an important but not a strategic part of the Edcon business, as it is not focused on clothing, beauty and home categories, and we would only sell if it’s good for CNA.
“The new owners have the muscle and extensive management focus and leadership expertise to invest in the business. I am also pleased that this transaction will not result in any job losses.”
According to a statement, the Astoria consortium intends to focus CNA on books, stationery, magazines and gifting. It will signal a move away from technology items such as phones and laptops.
“We believe that this transaction will be welcomed by staff, landlords and suppliers including publishers, both locally and internationally,” said Astoria Investments.
“The ongoing process of consolidating, merging and rebranding of the businesses, will ensure an offering of a selected set of private and some international brands, while also being a fashion and beauty retailer that provides credit.”
Edcon has been staring into a financial abyss for the past few years. It has billions in debt, which has snowballed since American investment firm Bain Capital bought it in 2007.
Last year, the group was saved from collapse by securing a R2.7-billion lifeline – a deal struck with landlords, the Public Investment Corporation, and creditors.
The loss-making Boardmans and Red Square chains have since been shut, and a number of prominent stores – including the Edgars in Rosebank mall, and various CNA outlets – have been closed.
By Alistair Anderson for BusinessLive
Edcon is a large employer, with 40,000 staff, while its operations also affect numerous suppliers and 100,000 workers indirectly.
Edcon has been battling to save jobs following some poor strategic decisions and mounting competition from newer retailers who have eaten into its market share over the past decade. In the past few weeks, it managed to sign a rental savings deal with a fifth of its landlords so that CEO Grant Pattison could implement a turnaround plan. This plan includes selling or closing underperforming businesses and flattening management structures.
Read more here: https://www.businesslive.co.za/bd/companies/retail-and-consumer/2019-04-14-how-edcons-survival-will-avert-retail-apocalypse/
By Glenda Williamns for Fin Week
Edcon’s current restructuring process includes significant space rationalisation.
JSE-listed real estate investment trust (REIT) Attacq, owner of Mall of Africa, announced that Edcon exposure, (25 499sqm at 31 December 2018, down from 29 262sqm at 30 June 2018) will settle at 22 945sqm of primary gross lettable area (PGLA) by 1 October 2019 for an estimated 3% of the REIT’s effective PGLA. Contractual gross monthly rental at this time will be R3.2m, down from R4.1m at 30 June 2018.
Owner of Sandton City, Liberty Two Degrees’ (L2D), says Edcon currently occupies 5.3% of its current portfolio, which is expected to reduce to 4.3% of gross lettable area (GLA) by 31 December 2019.
Redefine Properties, SA’s second-largest REIT and owner of Centurion Mall, has a hefty retail portfolio that at 31 August 2018 comprised 1.4m sqm of GLA.
The REIT is a significant landlord to Edcon with GLA exposure of 78 760sqm (down from 122 856sqm at August 2018) housing the Edgars and Jet brands.
Redefine’s equity contribution will amount to R54.6m, the REIT says. As a consequence, Redefine will receive 100% of its rental due from Edcon on 56 788sqm representing in force leases for profitable Edcon stores.
Redefine has also agreed to rental reductions up to a maximum amount of R13.8m over a two-year period in respect of leases totaling 21 972sqm.
Other major players in the listed property sector have yet to make their formal announcements on the recapitalisation process.
Some like Hyprop Investments Limited, owner of super-regional mall Canal Walk, have significant exposure to Edcon.
At 31 December 2018 that amounts to 9.4% of GLA (66 781sqm) and 7.6% of gross income.
Speaking at Hyprop’s interim financial results for the six months to December 2018, newly-appointed CEO Morné Wilken says that almost 7 600sqm of Edcon’s total 67 000sqm floorspace has already been taken back and mostly re-tenanted.
Hyprop has, in principle, agreed to support the Edcon restructuring proposal with a reduction in rentals, compensated for by equity participation in Edcon, says Wilken.
“While that will impact distributable earnings in the 2019 and 2020 financial years by 0.8% and 2.3% respectively, it is considered an acceptable limitation of the risk,” he says.
Others like top-performing SA REIT and low-LSM focused Fairvest Property Holdings have insignificant Edcon exposure.
In Fairvest’s case that’s a mere 0.8% and exposure is only to the still well-trading Jet Stores. “That,” CEO Darren Wilder tells finweek “was not by chance, but by strategy.”