The law — and the need to urgently “rescue” Edcon to ward off a complete collapse of the retailing giant and huge job losses — stands against a legal bid by some creditors to stop meetings to be held on Monday to approve or reject the business rescue plan for the company.
This is the response by Edcon’s business rescue practitioners to an 11th hour high court application to halt the two meetings at which the business rescue plan was due to be discussed and possibly adopted.
Durban-based Kingsgate Clothing and Clematis Trading said in their application in the Pretoria high court, set down for hearing on Monday morning, that they are acting on behalf of at least 11 other companies.
Kingsgate is owed R24m and Clematis, about R18.5m.
They say as concurrent (not secured) creditors they are now being offered 4c in the rand after initially being assured they would get at least 50c.
They have accused business rescue practitioners, appointed at the beginning of May, of “steamrolling” through its proposal to sell off divisions of Edcon to “unnamed” parties for undisclosed amounts, for not supplying all the necessary documentation, attempting to raise their fees (from the statutory R2,000 an hour to R4,500 an hour) without proper motivation and for not considering a proposal to swap debt for equity in the company.
In an opposing affidavit filed on Sunday, business rescue practitioner Lance Schapiro said the application was an abuse of court process, “an attempt to steal a march” and was littered with factual inaccuracies.
He said in terms of the Companies Act, they were compelled to convene the meeting of affected parties within 10 days after publishing the rescue plan (on June 9).
“They (the applicants) had an opportunity to consider the plan within the statutory time frame.
“On June 15, we had a detailed question and answer session with creditors. It lasted two-and-a-half hours and further financial information was provided.”
Schapiro said Kingsgate and Clematis had other remedies available to them.
“They can attend the meeting and motion an amendment to the plan or for an adjournment of the meeting, if they can persuade other affected people.
“Or they can apply to court after the adoption of the rescue plan to have it said aside,” he said.
“They do not represent all concurrent creditors. Their claim is less than 0.6% of creditor voting interests.
“The total amount owed to Edcon’s creditors is about R8.1bn, comprising R3.8bn to secured creditors and R4.3bn to unsecured creditors.
“The proxy forms received to date reflect an overwhelming support for the adoption of the plan, over 85% thus far.”
Schapiro, said the plan contemplated saving thousands of jobs which were at risk if the meeting did not proceed and the plan was not adopted.
“Edcon does not have any post commencement finance. Stock has been purchased on a cash on delivery basis. It also has to pay operation and employment costs. It is not sustainable.”
A rescue would have to be implemented without delay, he said.
“If stock is not purchased, Edcon will run out of inventory and its businesses will likely fail in the summer season due to lack of product.
“Edcon does not have the luxury of time.”
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