Mbabane: The bell may be tolling for Africa’s biggest non-food retailer after Edcon announced that it has started with voluntary business rescue proceedings after losing E2 billion in turnover during SA’s lockdown, it said in a letter to suppliers on Wednesday.
According to South African online publication, Business Day, the group said it is unable to meet its financial obligations, and is also expecting “muted demand” once SA’s lockdown ends.
The retailer’s already-fragile state has been exacerbated by the coronavirus.
Business Day reported that the letter states the business rescue proceedings place a moratorium on all legal and enforcement actions against the company.
It said it could still resume operations and open Edgars and Jet stores in “business rescue mode” on May 1 in line with the lockdown regulations.
Business Day went on to say the letter said the E2.7 billion rescue funding from the Public Investment Corporation (PIC) and landlords had been used to meet debt and pay bills up until March 2020.
It is still owed E230 million in business rescue funding not yet paid. The letter does not specify who owes it.
Edcon said it was on track to meet bailout targets in December 2019, before the coronavirus lockdown was implemented, adding that it has no cash to pay suppliers as sales dropped by 40 percent when social-distancing was encouraged from mid-March. It used its last cash for salaries.
The company has faced multiple bailouts after Bain Capital borrowed billions of rand in foreign currency to take the listed firm private and the debt burden became to big for Edcon.
Edcon has a footprint in Eswatini and stores under its wing are Edgars, Legit, Edgars Active and Jet Stores. However, the Business Day report didn’t touch the group’s operations outside South Africa.
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