BAIN, a private equity fund, has thrown in the towel on its involvement with Edcon and its leading retail brands including Edgars. When it took over Edcon in 2007, Bain immediately converted the equity stake it had acquired from the Edcon shareholders for about R25bn into additional Edcon debt of some R24bn. It has now reversed this transaction, converting the outstanding debt of Edcon back into equity.The 2008 balance sheet reported total Edcon assets of R38.1bn, up from only R9.5bn the year before. Much of these extra assets were created by writing up the more expensive intangible assets including goodwill, that Bain had paid for and raised Edcon debt against.The cash flow statement for 2008 reports "investments to expand operations: R24.4bn". This was not so. The cash raised was used to reconstruct the balance sheet, not to expand operations.Moreover, it failed to persuade the South African Revenue Service (SARS) that the extra borrowing was undertaken to produce extra income. Ed...
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