Ellerine owes creditors R1.3bn

Johannesburg -  The former furniture unit of failed lender African Bank Investments [JSE:ABL] says it owes creditors R1.3bn ($117m), nearly half of that to major lenders including FirstRand [JSE:FSR] and Standard Bank [JSE:SBK], documents showed.

The debt reflects the extent to which Abil's failure in August has rippled across corporate South Africa, knocking credit ratings, investor confidence and even hurting small suppliers such as florists and panel beaters.

Details of Ellerine's creditors were included in a 117-page "business rescue" restructuring plan, a form of temporary protection from creditors the company was forced to take after losing funding from Abil.

The restructuring plan shows Ellerine owes R241m to FirstRand, R150m to Standard Bank and R100m each to Barclays Africa [JSE:BGA] and Investec [JSE:INL], a total of R591m ($53m).

Overall, the furniture company that has nearly 900 stores and employs 8 000 people owes almost R1.3bn ($117m) and is likely to be wound down.

According to the documents, FirstRand itself has submitted a smaller claim of R199.2m, while Investec says it is owed R120.6m, more than the R100m in the plan.

An Investec spokesperson said the bank's R100m exposure, as stipulated by Ellerine, was "guaranteed" by Abil.

A FirstRand spokesperson said its exposure was secured by "assets financed and intergroup guarantees".

Standard Bank and Barclays Africa declined to comment.

Store closures

Founded in 1969, Ellerine has six chains selling furniture and home appliances across South Africa.

It also does business in Botswana, Namibia, Lesotho, Zambia and Swaziland. Abil bought Ellerine in 2008 in an ultimately disastrous attempt to sell furniture on credit.

The rescue plan lists hundreds of creditors hit by exposure to Ellerine. Aside from the four banks, most are smaller firms from print shops to grocery stores to gardeners.

It owes R48 000 to South Africa's largest cinema chain and more than R700 000 to the state broadcaster.

"The scale and complexity of the business rescue is unprecedented in the history of South Africa," said Leslie Matuson and Jayant Pema, the administrators leading the Ellerine restructuring.

Out of its nearly 900 stores, Ellerine plans to close 388 this month and 302 next month. It is in advanced talks to sell two of its brands to other furniture retailers. All remaining stores may need to be closed by January.

Creditors are due to vote on the business rescue plan on Monday and a rejection of the restructuring would likely lead to Ellerine being placed into liquidation.

Abil itself was rescued by the South African Reserve Bank (Sarb) after it was hit by a flood of bad debts from its core market of low-income borrowers failing to repay loans.

The bank is being restructured by a government-appointed outside supervisor who has said he aims to relist it on the Johannesburg stock exchange by early next year.

The Sarb also launched an investigation into Abil to determine whether its former management engaged in fraud or acted negligently.

READ: African Bank collecting R2.5bn debt a month - curator