South Africa’s retail group Edcon has sent retrenchment notices to all employees after it failed to field concrete offers from potential buyers.
The group said that it has sent Section 189 retrenchment notices to 22,000 workers, meaning that jobs of everyone employed by the retailer are on the line.
Edcon, which owns retailers Edgars, CNA and Jet, currently employs approximately 17,000 people on a full-time basis and about 5,000 seasonal workers.
In a statement published on June, 9, 2020 Edcon’s Business Rescue Practitioners (BRPs) said that the company has paid salaries to staff in the months of April and May and is expected to make the June 2020 salary payment.
“The practitioners can confirm that the payment of salaries will continue to be a priority during the business rescue period, subject to trading conditions and continued support being received from the TERS and UIF processes,” it said.
“It is clear that it is in the best interests of all stakeholders to proceed with this business rescue plan, which fundamentally seeks to obtain the sale of the business and, or its divisions, importantly contributing to job preservation and business continuity.
“Creditors and landlords will also be in a better position as they will not only receive better dividends but the sale will also provide them with sustainable customers to ensure continued trading.”
Bloomberg reported last week that Edgars needs potential buyers to make binding offers by the end of June to prevent wind-up proceedings.
The retrenchment are the culmination of years of struggle at Edgars, which was founded in central Johannesburg in 1929 and sells clothes, shoes and cosmetics from just over 200 stores.
As part of Edcon, Edgars was included in an ill-fated buyout by U.S private equity firm Bain Capital Private Equity LP in 2007, which burdened the parent company with debt just as the economy hit a downturn following the global financial crisis.
“It would make a good case study of how a darling can fall from grace,” said Rella Suskin, head of research at Benguela Global Fund Managers in Johannesburg.
“Cash flows have been used to service the interest burden, leaving little to be invested in maintaining the strength of the brand and keeping up with retail trends.”