Group Five suspended as taps run dry

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Group Five suspended as taps run dry

Published Date: 2019-03-13 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Group Five suspended as taps run dry

The construction and infrastructure group says shareholders have a slim chance of realising any value as it joins Basil Read and Esor in business rescue.

Group Five suspended its shares on the JSE yesterday and said it had entered business rescue after banks turned down its request for more funding.

The group's wholly-owned subsidiary, G5 Construction, approached lenders last month for additional bridge funding to help it meet its short-term working capital requirements but was told last week that it was too risky. Without the extra cash, it said it faced a situation of "financial distress" and would be unable to pay debts as they fell due. It said its board of directors resolved to place both companies into business rescue.

Business rescue is a form of bankruptcy protection and aims to help rehabilitate insolvent companies, providing temporary supervision and management of the business so that it can be nursed back to health, if possible. The aim is to keep businesses functioning to preserve jobs while structuring payment schemes for creditors. Other construction groups including Basil Read and Esor have also entered business rescue due to the tough position the sector finds itself in, with a lack of government or private sector spending on infrastructure.

Group Five said its financial constraints and those of G5 Construction were exacerbated after Cenpower, its client in Ghana, called in bank guarantees of $62.7 million in November and $43.8 million in December relating to the construction of the Kpone power plant following several delays to the project and the termination of Group Five's contract.

It said G5 Construction was conducting retrenchment proceedings, which would likely result in a significant amount of severance pay. Bridge funding of R650 million advanced by the lenders last April is due to be repaid in May.

Due to its position, Group Five's board decided it was prudent to suspend trading of the group's shares on the JSE.

Last month, Group Five said its CEO, Themba Mosai, had quit at the end of January. He took over as CEO a year ago following the resignation of Eric Vemer. Non-executive director Thabo Kgogo replaced Mosai as interim CEO.

Apart from its ailing construction business, the group has attractive assets that it may be able to sell, including Intertoll Europe and toll concessions in Africa. In October 2017, Greenbay Properties, since renamed Lighthouse Capital, offered to buy its European assets including its highway toll road business for R1.6 billion. Group Five allowed the offer to lapse after saying the offer undervalued the business.

Group Five's shares closed at 89c on Monday ahead of the suspension, valuing the company at just under R100 million.





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