South Africa’s Edcon defers $110mn coupon payment

JOHANNESBURG / Reuters

South African retailer Edcon has received support from its lenders to defer 1.6 billion rand ($110 million) of interest payments to December to boost its liquidity, it announced recently.
Taken private in a highly leveraged buyout by Bain Capital in 2007, the country’s biggest clothing retailer said close to 80 percent of holders of a 2018 bond denominated in dollars and euros supported the plan.
Edcon required the backing of at least 75 percent of the holders of 617 million euros and $250 million of bonds, which carry a 9.5 percent coupon, to extend the suspension to all holders.
“The cash-pay interest deferral will enhance the liquidity position of the group,” Edcon said in a statement. The coupon payment was due this month.
The retailer has been grappling with high debts for several years, after problems in its credit business in 2014 coincided with an economic slowdown and weak consumer spending in South Africa.
A 425 million euro bond – originally pitched in late 2013 as a bridge to an initial public offering – was written down last year in a distressed exchange offer that reduced the company’s debt pile by 4.5 billion rand and its interest payments by 1 billion rand.
But the weaker rand currency, which has tumbled by 40 percent against the dollar since late 2014, has strained Edcon’s ability to pay down its debt denominated in euros and dollars.
Edcon Limited is a retail company based in Johannesburg, South Africa. Its subsidiaries include Edgars, a department store with 37 branches.
Edcon Ltd is the leading Clothing, Footwear and Textiles (CFT) retailing group in South Africa trading through a range of retail formats. The first Edgars store was opened on 6 September 1929 in Joubert Street, Johannesburg. Since then, the Company has grown to ten retail brands trading in over 1000 stores in South Africa, Botswana, Namibia, Swaziland, Lesotho and Zimbabwe.
Edcon’s retail business has, through recent acquisitions, added top stationery and houseware brands as well as general merchandise to its CFT portfolio. Edcon Financial Services provides credit facilities and financial services products to the Group’s over 4 million cardholders.