How much Edcon owes, and to whom

The list of Edcon’s secured creditors, published as part of the business rescue plan on Monday, reveals that a total of R3.7 billion is owed to more than 80 entities.

The list of unsecured creditors is likely far larger (running to many more billions), but these businesses are either fourth or last in the queue, depending on their status.

The business rescue practitioners have announced that 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. They hope to conclude this by July with a completion of the transaction(s) as soon as practically possible. The practitioners have noted there are 15 interested parties.

The UIF is owed more than R888m

The single largest creditor is the Unemployment Insurance Fund (UIF), represented by the Public Investment Corporation. The UIF is owed R888.8 million, thanks to instruments that allow it a conditional claim under business rescue (and/or liquidation). It invested a total of R1.2 billion into the group as part of a R2.7 billion recapitalisation in March last year.

Next-largest is the R834 million owed to various Apollo entities, while the third-biggest claim is from AlbaCore Capital (R496 million). The former is the global private equity group, while the latter is a European investment firm that focuses on “private debt and opportunistic credit investments”.

These entities would have claims based on them being a bondholder under the former Edcon structure. Those debt holders became equity holders as part of the recapitalisation.

Other major landlords who are secured creditors include Pareto (R6.8 million), and insurers Liberty Group (R18.7 million) and Old Mutual (R11.7 million).

As at April 30, assets totalling nearly R4.4 billion were held as security by the creditors. These include property, plant, equipment, trade receivables, amounts owed by related parties (mostly African operations), sundry receivables and prepayments as well as cash.

Under the business rescue plan, the secured creditors will receive all trading proceeds being generated from the sale of stock under the current business rescue process as well as the proceeds from the sale of Edcon’s second-look credit book.

The rest of the list …

Any proceeds thereafter, in other words from the accelerated sales process, will be allocated in the following order:

• Business rescue costs (including advisors and legal costs)
• Employees (to the extent that they have not been paid during the business rescue process)
• Secured (post-commencement finance) creditors
• Unsecured (post-commencement finance) creditors
• Employees (to the extent that they have not been paid prior to the business rescue process)
• Unsecured/general concurrent creditors.

The business rescue practitioners make the point that without an accelerated sale of the business or parts thereof, a wind-down process is still preferable to liquidation. Secured creditors would receive 19 cents in the rand under a wind-down process, and only 5.5 cents in the rand in a liquidation.

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