Up to 3,500 jobs expected to be saved at Group Five
Rescue practitioners say a ‘solid plan’ will be presented to creditors for approval on September 11
Between 3,000 and 3,500 jobs at struggling construction firm Group Five are expected to be saved through the sale of its assets to other entities as a “going concern”, the company’s business rescue practitioners have announced.
In their plan, published before the end of August, practitioners Peter van den Steen and Dave Lake, who took over the construction company and its associate Group Five Ltd in March, said they had been able to produce a ‘solid plan’ which will be presented to creditors for approval on September 11.
One of the main elements was that there was expected to be R5bn more available to creditor's through this business rescue process as opposed to liquidation.
They say the business rescue processes for the two entities are legally separate, with Group Five Construction representing the majority of the businesses.
“Notwithstanding that Group Five Construction is an extremely complex and wide-ranging business under severe financial distress, we remain confident that a successful business rescue will balance the rights and interests of all relevant stakeholders,” they said.
“The losses incurred by creditors will be materially less, at approximately R5bn, under the proposed rescue plans relative to the alternative scenario of a liquidation of the company.
“Through the restructuring and sale of businesses we anticipate that between 3,000 to 3,500 jobs will be saved, albeit under new ownership.”
The practitioners say they have secured funding from lender banks to provide operational solvency during the business rescue proceedings and to ensure that asset sale value realisations are optimised and losses from projects minimised.
“Wherever possible, subsidiaries and operating divisions of Group Five Construction have been or are being restructured and disposed of to new ownership, for fair value, on a solvent basis and as going concerns.
“Where this is not possible, a controlled wind-down of the relevant subsidiaries and companies, as well as the head office of the company, will be implemented.”
All other assets, financial or otherwise, of the company were being vigorously pursued and/or disposed of in controlled disposal processes.
Although certain of these sales processes include complex sales of international assets, and/or regulatory procedures and approvals that are outside of their control, they anticipated completing most sales by the end of March 2020.
They said there would be no fire sales.
“We are actively engaged with our construction clients to minimise disruptions in those projects.
“We also continue to carefully manage group costs and to reduce them in accordance with the diminishing requirements of the company," the practitioners said.
The business rescue plan outlined three distinct trading periods: The period from the start of the business rescue proceedings to the date of approval of the plan; an implementation phase until March 2020 and a further phase until the termination of the business rescue proceedings.
“Our aim is to accelerate the payment of early distributions to creditors to which they will be entitled, including early distributions to be made during or at the end of the first implementation phase.
“We expect secured creditors, in aggregate, to receive distributions of between 66c and 78c for every rand owed, relative to 18c forecast in liquidation.
“Concurrent creditors are expected to receive distributions of between 9c and 20c for every rand owed, relative to 3.4c forecast in liquidation.”
With regards Group Five Ltd (which assets comprise shares in Everite and Group Five Construction) they said that company had total liabilities in excess of R6bn.
“The only asset that will realise proceeds for Group Five Limited is that of Everite.
“This business is currently being disposed of in a controlled sales process. Following a pledge and session made to funding banks, they will be the only recipient of the proceeds derived from this sale.”
They said Group Five Ltd will not realise any recovery from the business rescue proceedings of Group Five Construction. It would be wound up and delisted and “it is not anticipated at this time that there will be any return for its shareholders.