Struggling Group Five files for business rescue

Group Five and peers including Basil Read and Erbacon have succumbed to a depressed construction market in which major projects have failed to materialise

12 March 2019 - 11:37 By Nick Hedley
The contractor said its financial constraints had worsened after lenders called on guarantees relating to its disastrous Kpone power-plant project in Ghana.
The contractor said its financial constraints had worsened after lenders called on guarantees relating to its disastrous Kpone power-plant project in Ghana.
Image: REUTERS

Group Five says it has filed for business rescue — a process aimed at rehabilitating financially distressed companies — because lenders have not been willing to give it more funding.

The contractor and a number of its peers, including Basil Read and Erbacon, have succumbed to a depressed construction market in which major projects have failed to materialise owing to the state’s strained finances.

Group Five, whose shares were at R45 about five years ago, said on Tuesday that it had asked the JSE to suspend trading in its stock, which was priced at 89c at Monday's close.

The contractor, which was given bridge funding worth R650m from a consortium of lenders in April 2018, said its financial constraints had worsened after lenders called on guarantees relating to its disastrous Kpone power-plant project in Ghana.

The group, founded in 1974, is now retrenching staff and will probably have to fork out “a significant amount of severance pay”.

The consortium of lenders declined its request for more bridge funding last week, it said. Group Five is now in “financial distress” as it is unlikely to be able to pay all of its debts when they fall due within the next six months.

Group Five has resolved to appoint David Lake and Peter van den Steen of Metis Corporate Advisory as business rescue practitioners for both Group Five and subsidiary G5 Construction, it said.

The group said that there was a slim chance of any realisation of value.

“However, the board of directors of Group Five will continue to assess any expressions of interest as communicated previously to shareholders.”

Basil Read filed for business rescue in June 2018.

- BusinessLIVE

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