Group Five is in business rescue. Picture: MARIANNE SCHWANKHART
Group Five is in business rescue. Picture: MARIANNE SCHWANKHART

A successful rescue of the ailing Group Five construction firm will save up to 3,500 jobs and improve the shortfall to creditors by R5bn.

On Friday the business rescue practitioners Peter van Steen and Dave Lake released the business rescue plans for Group Five Construction and Group Five Ltd, which are separate legal entities. Group Five Construction represents the majority of the businesses, claims and recovery value within the greater group of companies.  

Group Five, like a number of other major construction firms in SA, has struggled to stay afloat in a depressed local economy. In March it filed for business rescue after it failed to obtain additional funding from a consortium of lenders.

Business rescue is a provision of the Companies Act which provides an alternative to liquidation and aims to rehabilitate a distressed entity.

Voting on the business rescue plans for both entities will take place in consecutive meetings on September 11.

In a statement issued on Friday night, Van Steen and Lake said they were pleased to present a solid rescue plan for Group Five Construction. “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 and 3,500 jobs will be saved, albeit under new ownership.”

On successful implementation of the business rescue plan, creditors that hold security for a claim against the company (secured creditors) are expected to receive distributions of between 66c and 78c in the rand — relative to 18c forecast in liquidation. Creditors with unsecured claims (concurrent creditors) are expected to receive distributions of between 9c and 20c in the rand, relative to 3.4c forecast in liquidation.

The practitioners successfully secured funding to run operations during the business rescue proceedings and to ensure that the realised asset sale value is optimised and that losses from projects are minimised.

Wherever possible, subsidiaries and operating divisions of Group Five Construction are being restructured and disposed of to new owners 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 will be implemented.

All other assets of the company are being disposed of in controlled processes. Although certain of these include complex sales of international assets and regulatory procedures and approvals that are outside the control of the business rescue practitioners, they anticipate completing most sales by the end of March 2020.

The practitioners noted that there had not been, nor would there be, any fire sales of assets.

It is not anticipated that Group Five Ltd will deliver any returns to shareholders. The company has total liabilities of over R6bn, while its assets are shares in Group Five Construction and Everite, a manufacturer of cement products.

According to the business rescue practitioners, the only asset that will realise proceeds for the company is that of Everite, which is being disposed of. The lender banks will be the only recipient of the proceeds from the sale. The entity will be wound up and delisted in time.