Business Rescue is on the rise, but during lockdown and COVID-19 is that a bad thing? With an unprecedented eight business rescue plans adopted in just four weeks, business rescue may be the ‘paramedic’ that our country needs to help save livelihoods.
By Hans Klopper, Head of Business Restructuring at BDO in SA
It’s been a busy few months, is not what you usually hear from business owners during COVID-19.
However, Business Rescue practitioners seem to be facing something different.
Dealing with the challenges presented by assisting multiple clients in catching “falling knives” and a general outburst of the emotional issues of many companies having to come to grips with the reality of Covid-19 (added to the consequent financial distress that is creeping in all over the economy), we have seen a sharp incline in business rescue cases as a result of lockdown and COVID-19.
During June 2020 we were appointed as the business rescue practitioners to the Pizza Hut operation in South Africa trading under the name of Marathon Restaurant group following interaction with the US shareholders and their South African attorneys since the very first stages of lockdown in early April 2020. The matter can be described as a “prepack” in that we managed to negotiate most of the terms of the restructuring before the commencement of business rescue proceedings. The company went into business rescue in early June. We managed to get a business rescue plan published within the requisite statutory 25 days and adopted by creditors a week later. This was only the third time in nine years that we managed to publish a business rescue plan within 25 business days! A process that commenced in early June was therefore done and dusted before the end of July 2020 and involved an investment of some R200 million by US investors.
Within the first week of July, on 6 July, two business rescue plans were adopted in the PAV Group of companies, being an almost 70-year-old shopfitting business in Worcester in the Western Cape involving a R 25 million commercial property and the company owning all the shopfitting equipment. Both business rescue plans were voted in by unanimous consent and the restructuring of the rest of the group’s remains a work in progress. This business rescue process started during the first week of March, immediately before lockdown. This was followed, on 10 July, by Musiamo Properties, a matter involving a boutique guesthouse/wine farm in the Stellenbosch area and other immovable property in Somerset West with an aggregate value of some R 30 million was restructured in terms of an adopted business rescue plan. This restructuring provides for the marketing of the properties in a structured manner over the next 9 months.
This was followed by the successful adoption of the business rescue plan in respect of South African Tyre Distributors. This matter commenced in September 2019 and an initial business rescue plan was adopted on 2 March 2020. Immediately after the adoption of the business rescue plan we were hit by Cocvid-19 and the lockdown, as a result we had to revisit the entire business rescue plan. In conjunction with management we managed to renegotiate all aspects of the proposal and we managed to publish an amended business rescue plan on 21 July. On 28 July 99% of creditors consisting of lenders, trade creditors adopted the business rescue plan and the company will continue trading. Since the commencement of business rescue proceedings in September 2019 we paid a bank some R 60 million in full and final settlement of its debt. In addition, we successfully published and adopted a business rescue plan in relation to the affairs of Darkrock (Pty) Ltd, being a coal trading and exploration company. The adopted plan envisages payments in excess of R50 million to creditors, to the full extent of their claims over time and return to solvency, thereafter, being placed back under the control of its management.
This was followed on 31 July by the adoption of the business rescue plan in connection with the property-owning company of the head office of ,the former listed, Esor Construction in the Germiston area of Johannesburg.
This was running concurrently with a meeting being held at exactly at the same time in Gauteng in connection with the business rescue of Kleinfontein Colliery, a coal mining operation which was placed in business rescue in January 2020. Despite the lockdown regulations and the devastating impact on the coal mining industry we not only managed to present a business rescue plan acceptable to the creditors of the company but, in what can only be described as a remarkable accomplishment, continued to maintain and operate on site.
In in the meantime, we are attending to the business rescue of Afarak Mogale, a subsidiary of a Finnish listed company, near Krugersdorp on the West Rand which has, in terms of replacement value, a value of circa
R 2 billion. The process is ongoing with challenges such as a monthly electricity account of circa R 10 million owing to Eskom.
We are also running the case of CODE clothing in the Western Cape with some 20 stores and in the process of procuring buyers from various other retailers. This matter has been ongoing since June.
Then, just as the month ended, on 30 July, we were appointed as the business rescue practitioner to The New House of Busby and are being complemented as a team by Tony Flynn, our UK trained restructuring professional with extensive retail experience. This is a company known as Bashique 705 (Pty) Ltd with some 150 stores countrywide. Their stores are trading under the trademarks such as Guess, Frasers, Aldo and Call it Spring.
There is also the ongoing matter of Dilokong Chrome Mine and it’s parent company ASA Metals which has been going since 2017 and the restructuring of One Step Ahead, a shoe retail chain in respect of which a business rescue plan was presented immediately before lockdown and which entailed renegotiation.
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