Johannesburg - Bain Capital plans to sell Edcon Holdings in a debt-to-equity deal, according to Edcon CEO Bernard Brookes.
As a result of the sale Edcon gross debt will be reduced to R6bn from R26.7bn, Brookes said in a presentation in Johannesburg on Tuesday.
This comes as Edcon announced on Tuesday a lock-up agreement to restructure Edcon’s capital structure, including a significant decrease in the outstanding amount of third-party debt of Edcon and a transfer of control over the Edcon Group’s operating companies from Bain Capital to certain of the Edcon’s existing creditors.
The LUA is expected to become binding shortly, subject to the satisfaction to certain conditions precedent.
“This important milestone in the history of the Edcon Group follows the recent payment deferral implemented in May 2016 and the securing of R1.5 billion of bridge financing under new Facilities A1 and A3 of the existing Super Senior Liquidity Facility Agreement," Brookes said in a statement.
"These all indicate the significant support we are receiving from our creditor base to ensure that we have a strong, robust and re-energised Edcon going forward.
"Our operational turnaround plans are already well underway and the finalisation of the process to reduce our debt will ensure Edcon remains the largest South African clothing retailer, but that it also returns to its former status as the leading clothing retailer in South Africa."
The restructuring is expected to materially improve the liquidity position of the Edcon to ensure ongoing operations as well as address the current high structural leverage and cash interest burden on the operating company, the firm said.
The extended maturities and additional funding should facilitate the ongoing operational turnaround and allow management to refocus onto running the business and executing its strategic plan, Edcon said.