By Contributing Author
Edgars needs buyers to put up a few binding offers, ideally by the end of June. This is the only way for them to stop the wind-up proceedings which will put the future of the clothing chain at risk. Administrators for the Edcon Holdings Ltd company chose to put the retailer up for sale, next to Thank U and Jet. This came after measures to try and stop the coronavirus cut off of some major sources of revenue had failed. Some 15 parties have all expressed interests in one or multiple companies but it remains to be seen how many are going to actively follow the proposals. The entire sale process really is the culmination of years of struggle.
Edgars, which was founded in Johannesburg in 1929, sells cosmetics, shoes and clothes. The company has 200 stores across the country. Edgars was included in a buy-out from a US equity firm known as Bain Capital. This happened to burden the company with debt right as the economy took a turn for the worse. It would make a very good case study of how a company so great can still fall from grace. Cash flow has been used to try and service the interest burden and this has left little available to be invested.
Jobs at Risk
When you look at the casino industry, you will soon see that lots of jobs are protected because the sector largely operates online. This makes the businesses much easier to sustain and therefore has helped them through this crisis. Retail companies or brick and mortar companies on the other hand are not as lucky, such as Edgars. When you look at Edgars, Thank U and Jet, you will soon see that they employ 17,292 workers. They also hire 5,000 on a seasonal basis. This is all documented in the rescue plan that has been created. A lot of this was put together by Piers Marsden and Lance Schapiro. Thousands more people are dependent on the shops though, and this is done through the major supplier network. The jobless rate for South Africa was at 29% right before the virus hit and this forced thousands more out of work.
Goldman Sachs
Goldman Sachs and Apollo Global Asset Management are some of the creditors who have claims to around 3.73 billion rand. This is around $218 million. The suppliers and the other service providers who are owed money amounts to more than 100 pages. Marsden and Schapiro tried to find a buyer or an investor in Edcon but none of them were remotely forthcoming. This means that any interested parties had to turn to Jet. They have more outlets and they also specialize in much cheaper clothing. Thank U happens to be a finance unit and they have around 14 million account holders. Jet is the business that is actually worth buying when you look at the structure overall. The main reason for this is because it is actually affordable for the traditional, South African customer. This is especially the case when you look at the kids’ category, as this is much more resilient when compared to womenswear.
