Stuttafords creditors opt for wind-down

Stuttafords has been placed in a business rescue wind-down after 61% of independent creditors, who are owed a total of R836-million, this week voted in favour of this process over a liquidation.

Unless a buyer comes forward, this means assets will be sold and stores closed in order to realise money for creditors and the business.

Creditors include the retailer's primary banker Nedbank, as well as brands such as Estee Lauder, Levi Strauss, Tommy Hilfiger and Polo. If the wind-down is completed, the name of the 159-year-old department store will fade into history, and the company, which will essentially be a shell, may still be liquidated.

On Wednesday this week, 61% of creditors voted in favour of the winding down. "It's a positive outcome for the staff of the company and given the circumstances it provides the best outcome for creditors and other affected parties," said CEO Robert Amoils.

"It's positive that the staff of the company, many of whom have been employed for over 20 years, will be entitled to their full retrenchment packages."

The entire company will be wound down in the next few months, unless bought by a third party. Various discussions have taken place between interested parties and the company but no formal offer has been made.

The company has five stores remaining out of nine at the beginning of this process. Canal Walk, Rosebank and Clearwater Mall were closed last month and the store in Brooklyn Mall this week.

"Over the next few months the remainder of the stores will be closed subject to any further offer," said Amoils.

Until this week, product was being supplied to the business on a limited basis. Further procurement of stock is unlikely.

In terms of the wind-down over the next few months, the funds generated will be distributed to affected parties. They will maintain their claims against the company and should they wish to place the company into liquidation after wind-down, they might still do so. By that point, though, the company will have no assets.

Stuttafords placed itself in voluntary business rescue on October 28 last year because it was reasonably likely that it would not be able to settle its financial obligations.

The business rescue plan, which focused on restoring the company to technical solvency was amended four times as conflict grew between shareholders, between management and some shareholders, and between some creditors and management.

Ellerine Bros, the single largest shareholder, withdrew from its commitment to inject R12-milion into the business in exchange for a 76% stake. It currently owns 26.4%. Ellerine Bros said it had lost faith in the management of the company and did not believe the business could be saved. It said management had not disclosed financial records sufficiently.

Amoils is Stuttafords' CEO as well as financial director of Vestacor, which holds 20.1% of the retailer.

In a wind-down within business rescue, concurrent creditors would get at least 3c in the rand, whereas in liquidation they would receive zero.

Some creditors, however, believe that Stuttafords should be liquidated, largely to allow for an investigation into what went wrong.

Once the business rescue wind-down is completed, creditors will be able to apply for the liquidation of the company and further investigate the allegations of reckless trading.