S.Africa: A famous company collapses – AGAIN – CNA: Creditors in the dark as business rescue looms – My Comments
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[I actually worked for the CNA for 2 years in about 1998-1999. Back then they also collapsed. I think they collapsed shortly after I left them. Back then the CNA was enormous. There was a CNA store in every town and city in South Africa. They sold books and stationery. They were EVERYWHERE. They went bust. I was at their head office in the years just prior to them collapsing the first time and I was not impressed with them. So their collapse back then was a big surprise to everyone. Then in more recent years they were revived as a shadow of their former selves. And now they're in trouble again. Jan]
Creditors remain in the dark as CNA battles to avoid business rescue. Reports emerged last week that the stationery retailer is in financial trouble and that the relationship between the board and CEO has soured.
The board is accusing CEO Benjamin Trisk of engaging business rescue practitioners without its consent, according to Business Day. The board is of the view that Trisk acted “unilaterally”. However, Trisk told the paper that, as a director, he had to look after the “welfare of the company, its staff and its creditors”.
He claims that the board discussed business rescue at the end of March.
Still waiting
Moneyweb understands that CNA has not paid multiple creditors for months. One creditor who is known to Moneyweb has still not been paid for January purchases.
A payment plan proposed by the retailer saw terms of 60 days effectively change to 120 days, subject to cash flow.
Last week, CNA contacted creditors to state that the proposed payment plan would be amended further with part payment now likely at the end of the month. The letter stated that the retailer needed time to put funding in place.
This suggests, on the surface at least, that funding is being lined up.
Letting go
Majority shareholder Astoria, which owns 70% of the business, announced on Thursday that it would sell its holding to management (which holds the remaining 30%) for the price it paid. It is unknown whether the ructions at board level contributed to this decision.
Astoria paid R1.2 million for the stake in April 2020 and immediately wrote the value of the stake down to zero. It says it did not provide any “further equity or debt funding” to CNA.
In October, Astoria said that “as expected, August and September were slow trading months for CNA and the business continues to receive much-needed support from landlords and staff”.
“The 2021 back-to-school season will provide a good indication of the prospects of the business,” it added.
Tough going
By March, Astoria confirmed that CNA had been established as a standalone business by the end of 2020 (it had to extricate itself from the Edcon Group). It said “despite having established its own physical infrastructure in the form of a head office and distribution capacity, trading has been difficult.
“As this is the first year of trading as a standalone business, and since a number of categories were discontinued, like-for-like comparisons are difficult to draw. Sales have fallen short of the pre-Covid business plan.”
It added: “Landlords have been extremely helpful under current trading conditions. Paying suppliers in full and on time remains the top priority … [and] it is unlikely that we will have to provide any further capital to the business.”
Looking for funding
At least one supplier has questioned what value Astoria added to the business during its 13-month ownership, especially since it did not put any additional capital into the retailer.
Trading is clearly under pressure with stores not stocked as well as they arguably should be. Some suppliers are no longer providing stock to CNA until payments are received, which could explain the stock situation somewhat.
Unless funding is secured, presumably from a new investor, one could assume that the company will be placed in business rescue.
It is highly unlikely that it will be able to trade its way out of this situation.
Twice burned
Suppliers could end up being burnt twice if CNA does enter business rescue, with most still owed money by Edcon.
Under Edcon’s business rescue plan, concurrent/unsecured creditors are likely to receive only 4 cents in the rand.
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