EARLY EN­GAGE­MENT AROUND FUND­ING

Finweek English Edition - - INSIGHT: LOCAL -

The em­pir­i­cal find­ings of the re­search con­firmed that the cur­rent level of PCF in SA is non-ex­is­tent. Some of the rea­sons for this in­clude many of un­in­tended con­se­quences of the new­ness of the Act men­tioned pre­vi­ously, busi­ness res­cue pro­cesses be­ing left too late, the poor fi­nan­cial state of the busi­ness that even­tu­ally files for res­cue and the sig­nif­i­cant im­pact on the out­come by some of the key play­ers (eg the fi­nanciers and busi­ness res­cue prac­ti­tion­ers).

There­fore one of the key ways for busi­nesses to avoid this co­nun­drum is to pre­pare them­selves early on by en­gag­ing early with their cred­i­tors and lenders when they see the writ­ing on the wall. The ear­lier a busi­ness con­sid­ers its op­tions on the road to busi­ness res­cue, the more fi­nanc­ing av­enues are avail­able to it. The suc­cess of a busi­ness res­cue is linked to the abil­ity of rais­ing PCF suc­cess­fully. How­ever the re­search cur­rently shows that there is a con­cern­ingly low level of PCF. It is in­ter­est­ing to note the num­ber of con­cerns men­tioned re­gard­ing the un­cer­tainty still sur­round­ing the in­ter­pre­ta­tion of the Act and the need for ad­di­tional case law or prece­dents to pro­vide play­ers in the in­dus­try with the con­fi­dence to get in­volved.

The as­sump­tion that busi­ness res­cue it­self, through the de­fined pro­cesses avail­able, will help to se­cure PCF, is mis­lead­ing. In re­al­ity the only po­ten­tial sources of fund­ing will come from tra­di­tional and ex­ist­ing lenders/cred­i­tors, who may al­ready be too over­ex­posed to sup­port the busi­ness any fur­ther. There­fore, if fund­ing is cru­cial to the suc­cess of busi­ness res­cue, it is crit­i­cal that man­age­ment en­sure that it se­cures PCF way be­fore, and as part of their de­ci­sion to file for busi­ness res­cue.

Wanya du Preez is Se­nior Man­ager of Re­struc­tur­ing Ser­vices, Cor­po­rate Fi­nance, at Deloitte .

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