What’s threatening Stuttafords’ rescue?
Ellerines backs away from a R12m payment because ‘Stuttafords had not met key terms for the deal’
A dispute has erupted between Stuttafords and Ellerine Bros, which could bring the former’s business-rescue plans to an unseemly end.
In March, creditors approved a proposal by Ellerines to inject R12m into the failing retailer for a 76% interest. Ellerines would subscribe to 600,000 shares in the company at a price of R20 per share.
However, Ellerines appears to have had a change of heart, which could prohibit or delay the implementation of the plan.
In a blistering exchange of attorney’s letters seen by Business Day, business-rescue practitioners John Evans and Neil Miller requested Ellerines to indicate whether it still intended to pay the R12m.
Ellerines responded that it was under no obligation to pay the amount because Stuttafords had not met key terms for the deal, including agreeing on terms with landlords for continued tenancy and obtaining a new loan facility from Nedbank.
In the attorneys’ letter, Ellerines denied any obligation to assist Stuttafords to achieve substantial implementation of the plan. Ellerines said it believed the plan would fail.
In response, the business rescuers warned that Ellerines’s conduct would have profound consequences for Stuttafords and all affected parties that were "promised a successful outcome and rescue". They said employees and creditors would be left "high and dry" and the rescue of Stuttafords lay within Ellerines’s ability and power.
The business-rescue practitioners have convened an urgent meeting of creditors for April 26. On Thursday, they urged creditors to attend the meeting to discuss the prospect of achieving substantial implementation and its effect on the business rehabilitation of the company.
Stuttafords placed itself into voluntary business rescue in October 2016.
The chain has eight department stores and 15 monobrand stores across SA. The group employs 950 people.
Stuttafords’ outstanding debt is about R836m. Of this amount, it owes Nedbank R147m.
Other creditors include Estée Lauder, which is owed R53.8m, Tommy Hilfiger (R14.6m) and L’Oreal (R13.5m).