Edcon Holdings will reportedly be releasing approximately 22,000 of its employees after serving them with retrenchment notices last Thursday amid its business rescue process.
The latest reports come after the retail company, which operates Edgars, Jet and CNA, and runs the Thank U programme, placed itself under voluntary business rescue due to a massive R2-billion economic fallout from the Covid-19 lockdown.
TimesLIVE reported that Edcon’s business rescue practitioners (BRPs) had issued notices to the employees in order to avoid the company being liquidated.
According to an Edgars employee, who worked for the retailer over 10 years, the company had shifted its main focus of selling clothes to its financial services, which brought in “easy millions of rands”.
“I believe that Edcon’s sales were affected by the fact that the company had lost focus on its core business, which is selling clothes and in the process, many of our stores found itself with shortages of stock,” said the unnamed employee.
Meanwhile, another employee said she was already in the process of searching for a new job.
The notices, dated June 10, were addressed to all employees and labour union SA Commercial, Catering and Allied Workers Union (Saccawu) and revealed that the company’s 2019 restructuring plan was on track until the end of December 2019.
Saccawu’s secretariat coordinator, Lucas Ramatlhodi said the union felt it was “too early” to place Edcon under business rescue despite receiving a bailout from the Public Investment Corporation (PIC).
“Although Edcon was bailout by the PIC, the union remains in the dark about how the bailout had assisted in saving the company from being liquidated,” he said.
Ramatlhodi further said the union had alerted Minister of Trade, Industry and Competition, Ebrahim Patel regarding the matter.
Lance Schapiro, one of the two BRP’s, said Edcon’s business rescue plan was still in its early stages and also revealed that the plan was to sell the entire business.
“There have been no offers yet for the company to be bought, but what I can say is that once the entire Edcon group or some parts of the company is sold, the remaining employees would be transferred to the new owners. Which will also save a number of jobs in the process,” he said.
The group has been trying to turnaround its fortunes under new chief executive officer (CEO) Grant Pattison and in March last year secured a R2.7-billion “recapitalisation funding” lifeline from the Unemployment Insurance Fund (UIF) via the PIC, existing lenders and several of its landlords to stay in business.
The list of Edcon’s secured creditors, published as part of the business rescue plan on 8 June, revealed that a total of R3.7 billion was owed by the company to more than 80 entities.
The list of unsecured creditors is likely far larger (running into many more billions), but these businesses are either fourth or last in the queue, depending on their status.
The business rescue practitioners have announced they are pursuing an accelerated sales process of parts of the Edcon group after no buyers nor any investors were found for the entire business.
Aside from the two operating divisions (Edgars and Jet), which are arguably less and more attractive respectively, the group’s second-look credit book will no doubt find a buyer.
It is unclear what value the Thank U rewards business would have by itself, and Edcon hopes to conclude the matter by July with completion of the transactions as soon as practically possible. The practitioners have noted there are 15 interested parties.
(Background reporting, Moneyweb)