Edcon got support from some bondholders and other debt providers to defer R1.6bn of interest payments to December to enable South Africa’s largest clothing retailer to focus on turning around its operations.
About 73% of holders of its dollar- and euro-denominated notes due in 2018 supported the plan to defer cash-pay interest obligations, the Johannesburg-based company owned by Bain Capital Partners LLC said in a statement on Friday.
It got unanimous support from its revolving-credit facility and term-loan lenders, Edcon said.
The company needed investors in at least 75% of the $950m of notes due March 2018 to support the moratorium to make it binding on all bondholders, Bloomberg reported on April 12, citing two people who asked not to be identified because the information is private.
A 30-day grace period ended yesterday for a $45m interest payment the company skipped last month, according to data compiled by Bloomberg. It owes another $45m in September, the data show.
“The company will launch a formal consent solicitation process, with the backing of its bank group, to build further participation from the holders of its 2018 senior secured notes to implement the deferral,” the company said.
Edcon’s capital structure is “unsustainable in the long term” due to high debt and interest costs, the concentration of debt maturing in 2017 and 2018, and unhedged exposure to foreign-currency debt, Standard & Poor’s said this year. The retailer was loaded with debt through the 2007 acquisition by Bain.
Retailers and consumers are under pressure as inflation rises and a weakening rand prompted the central bank to raise interest rates by 0.75 percentage point this year, increasing repayment costs for those with loans or mortgages.