Another major company in South Africa flies into business rescue

Military company Paramount Industrial Holdings (PIH) has filed for business rescue, reports News24.

Paramount was founded in 1994 and transformed from selling surplus military equipment to developing its own armoured vehicles, marine patrol vehicles, and aircraft.

Reports show that the company entered into business rescue as it faces significant financial distress, which poses a risk to its sustainability.

The news follows a dispute involving Paramount’s parent company, Paramount Group Ltd (PGL), where it lost an arbitration award to drone manufacturer Abu Dhabi Autonomous Systems Investments (ADASI).

Following the arbitration ruling, PGL filed for Chapter 11 bankruptcy protection in the USA, similar to the business rescue in South Africa, as debtors are protected from debts being called in.

The effect of the Chapter 11 bankruptcy filing is that it cut off funding to all South African operations, forcing the local business to rely on its revenue instead of a loan facility from PGL.

Major shifts in South Africa

Business rescue proceedings have hit several companies in South Africa, with mixed results across the board.

For instance, West Pack Lifestyle recently survived its business rescue proceedings.

The group entered business rescue in May, as it was financially distressed and unable to pay its debts when they became due.

However, the company found a private buyer who purchased its businesses and assets.

The offer to save the company was accepted in October, saving over 1,100 jobs, 30 corporate stores, 40 franchise stores, and the overall West Pack brand.

Autozine, the largest privately owned and leading distributor of auto parts, spares, and car accessories in South Africa, also survived liquidation proceedings.

The group entered business rescue proceedings in July 2024, struggling to pay its debts.

JSE-listed investment group Metair announced its plan to acquire AutoZone for R290 million.

Nevertheless, not all companies are as lucky. Solar company Hohm Energy and JSE-listed Ellies Holdings both entered liquidation after their respective business rescue proceedings could not save them.

Retailer Drip Footwear was also ordered to be liquidated in September after the company struggled to pay over R20 million for advertising services.

The owner of The Cross Trainer, Frame Leisure Trading, also entered liquidation in October as its business rescue practitioners’s turnaround plan did not gather the support of suppliers and landlords.

The drop in consumer spending and increased operational costs meant it could not keep up with its debt repayments.

Before business rescue practitioners submitted an urgent application to the Pretoria High Court to change the business rescue proceedings to liquidation proceedings, the consortium, Connecting Creativity, offered R80 million to take control of the company.

However, the offer from creditors to the consortium’s offer was largely negative.

Read: One of Pretoria’s most prominent malls is in trouble – and making changes to turn things around