Edgars group in debt move
EDCON, South Africa’s biggest clothing retailer, asked holders of the company’s million (R5.8-billion) of 2019 bonds to take a loss on their investment as the company seeks to shore up its finances.
Debt holders were given the option of exchanging each 000 (R13 656) of notes for
(R5 462) of new payment-in-kind (PIK) notes and a (R683) payment, the company said yesterday. A second option was to exchange 000 of notes for (R2 049) of super-senior payment-in-kind notes with the one-off payment and of new senior secured payment-in-kind securities as well as warrants for as much as 30% in equity.
The new notes will give Edcon the ability to pay interest with cash or debt, which means the loss-making retailer has an alternative to repaying in cash. The 2019 notes’maturity will also be extended to 2022.
“This is a haircut for bondholders,” said analyst Kyle Rollinson. “This is where a lot of the uncertainty lay, but is not necessarily sustainable. There will still be further uncertainty for the next 12-24 months as to what will ultimately happen.”
Edcon, owner of fashion chains including Edgars and Jet, was bought by US private equity firm Bain Capital for R25-billion in 2007 in a deal that burdened the company with debt.
If more than 90% of debt holders agree to the deal, the principal amount of the notes would drop by almost 73% and the interest on the notes would drop to 5% a year from almost 14%, Edcon said. The offer would expire on July 28 and the exchange should be completed by November, the retailer said. — BDlive