Phumelela said to be trying to raise R300m to save part of business
The company has been unable to stage events since the government banned large gatherings in mid-March
Phumelela Gaming and Leisure is in talks to raise R300m to stave off collapse as SA’s measures to contain the coronavirus curtail horse-racing and other sporting events, according to people familiar with the matter.
Talks with a capital provider and banks are under way to salvage at least part of the business, said the people, who asked not to be identified as the details of the terms are private. The company has been unable to stage events since the government banned large gatherings in mid-March.
If Phumelela can’t raise the money, the board will have to decide “whether there is any reasonable prospect that the group’s business can be rescued, or whether to make application for voluntary liquidation,” the group said in a statement on Monday. Efforts to reach the company for comment on the R300m target went unanswered.
Phumelela isn’t alone in facing the prospect of liquidation due to the coronavirus crisis. Last week, Edcon filed for administration after SA’s second-largest clothing retailer lost R2bn in sales and failed to pay suppliers as a result of a five-week strict lockdown.
Companies with high debt levels are taking the most strain. Phumelela’s net debt-to-equity ratio, including lease assets, is at 38%, it said in the statement.
Phumelela, which used to count former Steinhoff CEO Markus Jooste as a director and among its largest shareholders, had already started cutting jobs amid a horse-racing industry slump.
The stock has tumbled 94% since the start of 2019, leaving the company with a market value of less than R75m, and traded 8.8% lower as at 9.12am on Tuesday.
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