Edcon creditors are desperately trying to halt the adoption of a proposed business rescue plan for the ailing retailer which, if approved, would see them walk away with a measly 4c for every Rand they were owed.
Two concurrent creditors – Kingsgate and Clematis – have brought an urgent application against the business rescue practitioners (BRPs) appointed to try and salvage Edcon, Piers Marsden and Lance Shapiro. This in the hopes of postponing a meeting scheduled for Monday to "consider" their proposed plan.
"If the rescue plan were to be adopted on Monday afternoon, 22 June 2020, the concurrent creditors will have to bring an application to have it set aside on the grounds of a host of irregularities," Yusuf Vahed – the chief executive officer at Kingsgate – said in papers filed in the North Gauteng High Court in Pretoria at the weekend.
"This will result in very messy and expensive litigation which is entirely unnecessary".
Vahed argued that throughout the business rescue process, Edcon had maintained concurrent creditors could anticipate dividends of around 50 cent on the rand.
After the plan was published earlier this month, however, he said they "were totally shocked and startled to see that what was being suggested was an anticipated dividend to them of 4c on the Rand".
As a result, lawyers from Pather and Pather – acting on behalf of Kingsgate and Clematis – last week wrote to the BRPs, requesting that Monday's meeting be postponed and asking for additional information and documents.
But, said Vahed, as of Friday they had received no response and so had decided to turn to the court.
He said the proposed plan effectively contemplated that "for the R24-million of debt owed to Kingsgate and its associated companies, a dividend is contemplated that will amount to R960 000".
"If that is in fact the correct position, then I can say unequivocally that Kingsgate will have a very keen interest in considering a conversion of its debt into equity," he said. "This would not only have the advantage of giving it an expectation for a recovery in time to come of the R24 million, but it will also save the company and the tens of thousands of jobs that go with it. It will also serve to preserve a 50-year-old customer for Kingsgate".
But said Vahed, "from all the discussions with Marsden and Schapiro, they have given very short shrift to any suggestion of a contemplation of converting debt into equity."
He charged that "what Marsden and Schapiro contemplate doing is not rescuing Edcon at all."
"Instead, they have concluded that it is not capable of rescue and that the best expedient available is for them to either sell Edcon as a whole or one or more of its divisions," he said.
He accused the BRPS of having "some agenda that they are simply not disclosing to the concurrent creditors" and said they seemed "hell bent on pushing through an acceptance and approval of the rescue plan as they have tendered it".
"They say that there are one or more parties interested as buyers for Edcon and/or one or more of its divisions. But they will disclose neither the party nor the amount at which interest is being shown," he said.
"What Marsden and Shapiro are asking for in the rescue plan is for a blank cheque to sell Edcon or one or more of its divisions to an unnamed third party or parties and for an undisclosed amount. To add insult to injury, they want this power in their sole discretion," Vahed said, "The concurrent creditors find this audacious in the extreme … The abiding sense that the concurrent creditors have, in the absence of information and documents, is that Edcon and / or one or more of its divisions is being prepared for a suitor on a silver platter".
The case is expected to be heard on Monday morning.
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