S.Africa's Group Five in business rescue after lenders pull plug
* Cash crunch worsened after $62 mln claim from Ghana
* Tumbles into business rescue with 5.1 bln liabilities
* Second high-profile to file for bankruptcy protection
(Adds analyst comment, detail)
By Tiisetso Motsoeneng
JOHANNESBURG, March 12 (Reuters) - South African builder
Group Five filed for bankruptcy protection on Tuesday
after lenders pulled funding, threatening the collapse of one of
the biggest names in the local construction industry and more
than 8,000 jobs.
Group Five, which traces its roots back to the 1970s with
the tie-up of five construction companies, has struggled to make
money for years in an industry squeezed by stagnant economic
growth and a pullback in infrastructure spending by the
government and private sector.
Its cash flow problems were exacerbated late last year when
Ghana's Cenpower Generation Company claimed a total of $62.7
million over a building delay to a power plant in the west
African country. The project has since been terminated.
"It appears to be reasonably unlikely that the company will
be able to pay all of its debts as they fall due and payable
within the immediately ensuing six months," Group Five said.
"As a result, the board of directors of Group Five and G5
Construction have resolved to place each of these companies into
business rescue," it said in a statement.
South Africa's business rescue law, similar to Chapter 11
bankruptcy protection proceedings in the United States, allows a
financially distressed to temporarily delay creditors' claims
against it or its assets.
Group Five's problems threaten jobs cuts in country where
about one in five is unemployed. The company employs around
Group Five's equity is all but wiped out following years of
losses as the company, alongside rivals such as Murray & Roberts
and Aveng, struggled to recover from a sharp
slowdown in mega projects since the end 2010 FIFA World Cup.
Shares, which were suspended on Tuesday, last traded at 89
cents, giving it a market value of around 100 million rand ($7
million), a dramatic fall from over 5 billion rand in 2009.
Group Five, whose liabilities totalled 5 billion rand at the
end of June last year, also told stock holders that "there's a
slim chance for any realisation of value."
"It's a great shame because Group Five has been around
forever and at one stage was one of the biggest construction
companies," said Wayne McCurrie, a portfolio manager at
"The industry is not totally blameless in all of this. They
can't just say the environment is tough. In the good years, they
put on too much capacity, and in the bad years they didn't cut
capacity quick enough."
Group Five is the second high profile construction company
to tumble into business rescue in months, after rival Basil Read
filed in the middle of last year with 2.6 billion rand
($1 = 14.2837 rand)
(Additional reporting by Emma Rumney;
Editing by David Evans)
First Published: 2019-03-12 11:26:06
Updated 2019-03-12 13:53:55
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