Edcon aims to sew up debt with capital restructuring

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The company, which owns fashion retailers Edgars and Jet Stores, said in a trading update for the 52 weeks to 28 March 2015 that it owed bondholders and banks R23.9bn in outstanding capital that must be repaid starting next month.

The debt rose from R22.7bn the previous year.

Interest rates on the debt varied between 9.5% a year to a fixed 13.38% per year on the R5.38bn due in June 2019, Edcon's trading statement said.

The group has been struggling with dwindling sales revenues since a private equity consortium bought and delisted it in a debt-laden R25bn transaction in 2007. Revenue rose 2% to R27.5bn this year.

"These discussions are proceeding constructively, but there can be no assurance at this time that they will be successful," the retailer said, adding that the restructuring initiative may include "new debt financing".

Edcon has retained Goldman Sachs and Houlihan Lokey as advisers on the process.

Along with the debt restructuring, Econ said it would seek to dispose of unidentified noncore assets, which would help alleviate the burden. "Although we have identified noncore assets it is too early in the process, as we are in discussions with interested parties," said Edcon spokeswoman Debbie Millar when asked to identify the noncore assets.

"Noncore assets have nothing to do with stores," was her response when asked if some of the store brands would be sold.

Last year Edcon had to resort to retrenchments at its head office, but would not provide information on the outcomes.

"The restructuring process has been a painful one for the company. We would prefer to focus on the going-forward position," said the spokeswoman via public relations agency Aprio.

"There is no intention for any restructuring in the future. There are also no initiatives where job losses are envisaged. Our focus is ... on improving the capital structure."

To counter the pedestrian growth in SA, Edcon has focused on increasing its store footprint in the rest of Africa, where it opened 31 stores in the period.

The stores now total 200 out of the group's 597 shops. Sales outside SA jumped 10.9% in the period, against 2% at home.

"Stores outside SA remain an important part of the future of the group," said the spokeswoman. Consumer spending in SA, Edcon's single largest market, has continued to slow amid a prolonged slump in economic performance since 2007.

Private sector credit extension growth slowed to 8.7% year-on-year in February, from a growth of 9.2% the previous month, South African Reserve Bank statistics showed in March.

Economic growth also slowed to 1.3% in the first quarter of this year, compared to the quarter ended December, Statistics SA said in February.

The Bank has warned that growth would average 2.1% this year, from a high of 5.5% a year in 2007.

Source: BDpro via I-Net Bridge