Stuttafords’ last chance
INJECTION NO ELLERINES R12M CASH Retailer’s creditors have agreed to bite the bullet in a last-ditch attempt to ward off liquidation.
Stuttafords will live to fight another day as its creditors have approved the latest round of amendments to its rescue plan, even though the future of the department chain looks increasingly precarious.
About 61% of creditors, collectively owed R836 million by Stuttafords, voted in favour of a rescue plan on Wednesday that will see the 159-year-old retailer try fend off the worst-case scenario of liquidation. Among the creditors owed by Stuttafords are its main banker, Nedbank, and apparel brands Levi Strauss, Tommy Hilfiger, Polo, Puma, Adidas.
Since Stuttafords placed itself into voluntary business rescue on October 28, business rescue practitioners John Evans and Neil Miller have made four amendments to the rescue plan.
The approved rescue plan proposes that creditors would only get four cents for every R1 owed and an additional 21 cents over a period of 18 months – an estimated 75% write-off on their debt.
To qualify for the additional 21 cents, creditors would have to continue supplying Stuttafords with merchandise on consignment, or on 120 days’ credit terms.
The payout to creditors will be funded from new debt facilities from Nedbank and other institutions, proceeds from potential buyers of Stuttafords that will sign up for new equity of the retailer.
At the 11th hour, the rescue practitioners were made to assemble an alternative rescue plan after furniture family the Ellerine brothers scuppered plans to inject R12 million into the business in exchange for a 76% stake in Stuttafords from its current 26.4%. A successful cash injection would effectively make Ellerines the main sponsor of the rescue plan.
Ellerines accused Stuttafords management of not disclosing financial records in order for it to determine whether the retailer is capable of rescue.
Now, the rescue practitioners are going it alone without a sponsor. Evans said the approved amendments would allow for the restructuring of Stuttafords’ assets and give it a chance to turn its fortunes around.
Stuttafords has begun to consolidate its assets as part of its rescue. In May, it began shutting stores at Johannesburg’s Clearwater Mall and Rosebank Mall, and Canal Walk Shopping Centre in Cape Town. More store closures have been discussed.
In preparation for the closures, Stuttafords launched a slew of promotions – a mix of 50% discounts and three-for-two promotions – to raise money to purchase merchandise for the winter season.
Evans said if the rescue amendments were not adopted by creditors, then a process of winding down Stuttafords’ assets would begin. Some creditors believe Stuttafords should be liquidated to cut their losses. In a liquidation, the South African Revenue Service would be the first to receive all money due to it (R28 million) as well as secured creditors, including Nedbank. Shareholders including Ellerines and Vestacor (management company of Stuttafords, with a 20.1% stake) would get back the proceeds of their investment in the retailer.