South Africa’s Group five to offload more assets pending a business rescue

South Africa’s investments and concessions company, Group Five, which
filed for business rescue to rehabilitate financially its distressed companies because lenders were not been willing to give it more funding, has said that it would begin to offload some of its assets in order to keep afloat.

The formerly listed construction and engineering company sold its manufacturing assets, Everite and Sky Sands, to a consortium for R480 million ($34.74 million) to remain afloat in January 2019. By March, the company filed for business rescue and its listing on the JSE was suspended at 89cents a share. Barely a month later, the company has noted that it is planning to sell more assets since “other refinancing options failed to yield any results”.

According to the company’s business rescue practitioners, Peter van Steen and Dave Lake, Group Five remained financially distressed, with liabilities that materially outweighed its current assets. However, “the imbalance is being addressed through a moratorium on pre-business rescue creditors funding to be provided by a consortium of lenders once the business rescue plan was initiated, negotiations with counterparties, and the disposal of a number of different assets to a multiple of potential arm’s-length purchasers,” they stated.

Van Steen and Lake noted that the disposal of assets would help to reduce Group Five’s liabilities, meet its lending obligations and working capital requirements during business rescue proceedings. The group joined other South African heavyweights -NMC Construction, Basil Read, Esor Construction and Liviero Group- that fell into liquidation last year.

The company’s woes began when the government decided to reduce its spending budget and outlined the infrastructure and manufacturing sector as its focus. Presently, Group Five is still struggling to complete a power-station development called Kpone in Ghana, which has already racked up losses of R1.3 billion ($93.3 million).

Currently, it is estimated that the company would need R3.6billion ($258.2million) to fund working capital requirements up to December, including the repayment of the bridge funding facilities, meeting its other lender related obligations, and paying severance pay for retrenched workers.

A recently published Construction Industry Forecast Report described the civil engineering and construction tendering environment throughout the different grades of projects in South Africa as depressed. The report also noted that the severe decline in civil engineering and construction sector activity was likely to continue to slide over the next 12 to 18 months as the country hopefully approaches the bottom of an economic cycle.