Edcon in debt refinance talks

Johannesburg -Edcon Holdings, SA's largest clothing retailer, is in talks to refinance debt as the company seeks to increase cash flow and free up management to focus on attracting more customers to its stores.

The owner of the Edgars and Jet chains is negotiating “from bonds right the way through to outstanding letters and options that we have in revolving debt,” said CEO Bernie Brookes.

“The business can’t maintain the level of debt and still invest.”

Stabilise balance sheet

Bain Capital Partners, which bought Edcon for about R25bn in 2007 to tap rising economic growth in Africa’s second-largest economy, burdened the retailer with debt. That increased 15% to R27bn in the in the three months until the end of September 26, Edcon said in a statement. The company may release details of the refinancing before the end of December, Brookes said.

Edcon in June asked holders of the company’s R6.4bn of 2019 bonds to take a loss as the company sought to stabilise its balance sheet. Almost all of the bondholders accepted the exchange offer, cutting Edcon’s net-cash interest payment obligations by about R1bn a year.

“The debt makes management focus too much on cash flow and financing and working capital, whereas all the eyes and the ears of the business should be on the customer,” the CEO said.

Edcon retail sales declined 0.1% in the quarter as transactions settled on credit slumped 7.6%, the Johannesburg-based company said. Earnings before interest, taxes and other deductibles rose 3.1% to R501m. Cash sales, which account for almost 60% of the total, climbed 5.6%.

Other retailers

Yields on Edcon’s March 2018 bonds rose 13 basis points to 36.37%, according to Bloomberg generic pricing. Rates on the securities jumped to a record high 37.56% on September 30.

“I’m not going to call a result a great result when it’s not,” Brookes said.

“We’ve had a poor result compared to all the other retailers...we’ve got lots of things to do, but goodness the people are trying hard,” he said.

Brookes was head of Victoria, Australia-based Myer Holdings until May and became Edcon CEO on September 30.