Business rescue practitioners (BRPs) of the beleaguered automotive parts retailer, AutoZone, have confirmed being in productive negotiations with potential buyers of the franchise, which has necessitated the postponement of the rescue plan for the second time to early September.
Matuson & Associates BRPs said yesterday the latest postponement of publication of the business rescue plan was to allow identified potential investors to conduct due diligence on the enterprise, which is about R300 million in the red with Absa bank.
Lance Schapiro, a partner at Matuson & Associates, said the law firm could confirm the postponement of publishing the business rescue plan due to engagement with potential investors.
“The publication of the business rescue plan has been extended to September 2 to allow for due diligence by potential investors. We cannot say more about that at this stage,” Schapiro said.
This is as the legal department of the Motor Industry Staff Association (MISA) confirmed it was monitoring developments around ongoing negotiations.
“AutoZone has adequate cash flow from trading to continue to meet its committed financial obligations pending the process. MISA remains committed to leave no stone unturned to prevent any negative impact on employees,” said Martlé Keyter, MISA CEO.
MISA said it would continue to participate in the process to protect the interests of its members and to keep them informed of any developments.
Absa, in response to Business Report, confirmed it had confidence in the process and would not be enacting its attachment order obtained in the latter part of July, after the initiation declaration of the business rescue process.
“Absa is comfortable with the business rescue extension and continues to support AutoZone and the business rescue practitioners towards achieving a constructive solution,” the bank said yesterday.
AutoZone voluntarily entered business rescue proceedings after reaching a stalemate with its credit provider, Absa, as it cited struggles under the weight of debt repayments for years, with the Covid-19 pandemic period having hit the company particularly hard.
At the beginning of July, Absa elected not to provide any further debt extensions.
AutoZone currently has 214 wholly-owned retail branches and 33 member-owned franchise branches around Southern Africa, including Botswana, Namibia, and Swaziland. The company is owned by Ethos and AutoZone Management.
BRPs, Piers Masden and Jenna Osborne, have told creditors the presentation detailed their actions to stabilise the business and their opinion on whether AutoZone can survive in its current form.
“It is the view of the BRPs that, notwithstanding inevitable risks and challenges, there is a reasonable prospect of rescuing AutoZone Holdings,” they said.
However, this depends on the availability of funding, the underlying quality of the business after the BRPs complete their assessment, and the potential for investment in or the outright acquisition of the business.
Marsden and Osborne said they had now taken effective control of AutoZone, while working closely with the executive management.
The BRPs told creditors they had begun discussions with several parties who have expressed an interest in acquiring AutoZone.
This raised the possibility that the company may be sold, and the proceeds from the sale used to cover its debts.
“We believe that the business rescue process will provide a reasonable prospect in achieving a better outcome for all stakeholders than an immediate liquidation.”
This comes as sports retailer, Cross Trainer, became the latest well-known company to go into business rescue last week. The sports retailer has faced cash-flow problems stemming from the Covid-19 pandemic, and has struggled to keep up with its operational costs.
BUSINESS REPORT