February 02, 2017
The transaction involved 11 months of extensive negotiations with various creditor groups across Edcon's complex capital structure to restructure Edcon's ZAR 29 billion debt burden. In July the transaction also included the injection of ZAR 1.5 billion of super senior emergency bridge funding to allow Edcon to continue trading.
In October a binding Lock-Up Agreement was reached amongst 80% of the secured creditors which envisaged a South African compromise proceeding (similar to a UK Scheme of Arrangement) being used to render the restructuring binding across the entire Senior Secured and Super Senior creditor classes. The South African compromise proceeding received court sanction in Johannesburg in early January and, following the satisfaction of various conditions precedent (including US Chapter 15 recognition and competition approval in a number of southern African jurisdictions), the restructuring closed on February 1, 2017.The transaction de-levered Edcon's operating company group net leverage from x18.9 to x4.1 (excluding subordinated debt), right-sized Edcon's balance sheet to a sustainable level and reduced its cash interest burden. Edcon's liquidity position has significantly improved through the provision of ZAR 2.25 billion in new money, in the form of a tradeable instrument.
The restructuring resulted in four different New York law notes being issued, conversion of the existing facilities and a New RCF being provided. Equity was transferred to the senior creditors. The transaction prevented a potentially value-destructive insolvency process and has preserved the jobs of approximately 45,000 employees across southern Africa.
Andrew Wilkinson, senior restructuring partner, who led the Weil team, said "we are pleased to have been involved in a restructuring which hopes to save thousands of jobs and alleviate the concerns of suppliers, insurers and landlords, to ensure Edcon remains a stalwart of the South African retail market." On the success of the restructuring, Weil partner Alexander Wood, who co-led the team, said “our efforts, and those of the many advisors involved, should significantly improve the liquidity position of the business allowing Edcon's management to focus on running the business and successfully executing its strategic plan."
Weil fielded a cross-disciplinary team led by Restructuring partners Andrew Wilkinson and Alexander Wood, assisted by High Yield Partners Patrick Bright and Nitin Konchady, Banking partner Chris McLaughlin, Corporate partner Samantha McGonigle and lead associate Gemma Sage with associates Clare Cottle, Alex Horstmann, Alex Hasek, Bhavesh Madia, Robert Peel, Hein Visser and Chris Ballantyne.
You can view our other recent articles on European Restructuring Watch, a site dedicated to presenting our views on developments in European restructuring.