Edcon defers R1.6bn interest payments

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The company, owned by private equity group Bain Capital, said the move would allow it to save funds for its ongoing operational turnaround.

Of the fixed-rate 2018 senior secured notes, 9% are unhedged. The movement in the rand value of the unhedged euro-denominated debt has resulted in significant foreign exchange losses. Earlier this year, the rand weakened to as much as R19.51 to the euro, but has since recovered to about R16.53.

The 2018 note has coupon payments that are due this month. Edcon, which required the support of at least 75% of holders, said it had received the backing of 80%.

"We will continue discussions with our lenders and bondholders to further optimise our capital structure in support of our long-term growth," said Edcon CEO Bernie Brookes.

This was not the first time Edcon had tried to balance debt obligation with growth aspirations. Last November, it reached agreement with its bank lenders to extend the due dates of its debt worth about R7.9bn.

In addition, the group secured new commitments for a facility of R1.85bn. The combined transactions amounted to a R4.5bn debt deduction.

Until 2007, Edcon was the crown jewel of the retail sector. Boston-based Bain bought the company for R25bn in SA’s largest private equity buyout. Soon after the deal was finalised, the global economic crisis began, and hit the group hard.

Edcon is SA’s largest non-food retailer. It trades under three divisions: Edgars, which serves middle-and upper-income markets; Jet and Jet March, which serve middle-to lower-income markets; and the speciality division, made up of brands such as Red Square, Boardmans, and Legit.

It trades in SA, Botswana, Mozambique, Namibia, Swaziland, Lesotho, Zambia, Ghana, and Zimbabwe.

In the second quarter of its 2015 financial year, Edcon reported a net loss of R2.1bn from R627m in the year-earlier period. In the three months to end-September, total retail sales declined 0.1%, brought down by a 9.9% drop in credit sales.

Conditions in the retail sector are the toughest they have been a long time. Local inflation is on the rise, wage increases are minimal, employment is low and growth is depressed. Consumers are also highly indebted.