Hope for major South African retailer in liquidation
Sports retailer Frame Leisure Trading, which owns Cross Trainer and XTrend, could avoid liquidation following a consortium’s R80 million rand offer.
The sports retailer was severely hit by the COVID-19 pandemic, July 2021 unrest, and heavy rental escalations. The drop in consumer spending and increased operational costs meant the group could not keep up with all debt repayments.
The group thus entered business rescue on Wednesday, August 14.
Following engagements with creditors, the business rescue practitioners (BRPs), George Nell and Gideon Slabbert, told all affected parties that there was no reasonable prospect of the company’s rescue.
The BRPs suggested that a Newco take over the business, subject to an undertaking and commitment from all major suppliers, to transfer any and all rights to Newco. However, suppliers and landlords were unprepared to commit to the requests.
The BRPs submitted an urgent application to the Pretoria High Court on Thursday, October 17, to change the business rescue proceedings to liquidation proceedings. The court will hear the application on Tuesday, October 29.
Signs of life
Following the reports of the group entering liquidation processes, a consortium, Connecting Creativity, contacted BusinessTech, explaining that the group had made an offer to the BRPs ahead of the urgent application.
Klevas, one of the consortium’s members, is also a creditor of the business and claims to be owed roughly R16 million.
The consortium said it made an offer to the BRPs three weeks before the urgent application was filed at the High Court.
Connecting Creativity knew that the BRPs were considering liquidating the business as Standard Bank, a major creditor, did not believe in the viability of the business plan.
It said that stakeholders met with George Nel at his office on Wednesday, October 16 (a day prior to the High Court submission), with the parties agreeing to commence the liquidation process so that Connecting Creativity could canvass the creditors.
The group said that Nel was empathic about what had to be done to stop the losses, as spelt out on the liquidation notice.
“We did concur, but on the basis, we keep this low key until we had come to an agreement with the creditors,” said Connecting Creativity.
The BRPs confirmed to BusinessTech that they met with Connecting Creativity as part of their continued exploration of all avenues to rescue the company. They added that they would be willing to explore a transaction acceptable to the creditors.
“It was concluded at this meeting that the process of liquidation will proceed and that a possible offer could develop before or after the liquidation of the company,” said the BRPs.
“It must be stated that no formal offer was received but for email correspondence that formed part of negotiations.”
The BRPs made all the correspondence up to that stage available to all creditors for informal input regarding pursuing a possible transaction with Connecting Creativity.
“The overwhelming response was to the negative,” said the BRPs.
However, if acceptable, the BRPs would consider an offer and take legal and financial advice on whether a revised business rescue plan can be published.
“In such an event, the liquidation application could be withdrawn.”
The urgent application made to the Pretoria High Court on Thursday, October 17, can be found below:
Plan for the stores
Connecting Creativity said that if it took ownership of the group, it would take over the existing stores and do some deals on the Trademarks.
“There is a substantial amount of legal and tax issues that still have to be considered, but we did insist we take over the stores as quickly as possible to stabilize the situation,” said the consortium.
The consortium told BusinessTech that it offered R80 million—a large portion of which will be used to negotiate with the landlords and restock the stores.
It added that there would be an immediate injection of R7.5 million.
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