The large portion of their R80 million offer will be used to negotiate with the landlords and restock the stores.
Frame Leisure Trading’s business rescue practitioners have filed for the company to be liquated as they do not see a way out of its financial woes.
However, it is reported there is an R80 million offer on the table, as a sign of hope for the retailer.
Frame Leisure Trading is the parent company of The Cross Trainer, XKids, and XTrends stores.
The company entered business rescue in August 2024, as an attempt to save the company from being wiped off from the face of the earth due to its inability to service debt, amongst other challenges.
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Liquidation process
Business rescue practitioners, George Nell and Gideon Slabbert, in a notice, said taking into consideration the findings of their investigation into the company’s abilities, properties and financial situation, they do not see a reasonable prospect of the company being rescued.
Before taking the decision to file for liquidation at the High Court in Pretoria last week, the practitioners said they engaged with a number of financial institutions to secure funding for critical operational expenses such as rent obligations, and employee salaries, amongst others.
However, they have unsuccessfully managed to secure funding, as the majority of the institutions have declined to provide support. This hinders the practitioners from meeting the company’s financial obligations.
Nowhere to operate
In the notice, Nell and Slabbert outline that the majority of the company’s landlords have taken serious steps to cancel leases, leaving them with little to no space for operation.
When the company entered business rescue, there were 67 stores, with 56 being operational, however, there are currently 19 stores open.
“The actions by landlords to as the company to vacate the space with a sense of urgency underscores the deteriorating financial position of the company, as it can no longer meet it lease obligations.”
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Employees not paid
The notice also states that employees have not been paid in full for the month of September 2024. “This failure to meet payroll obligations has created significant financial destress for the workforce.”
The company’s liquidation will leave 175 employees stranded.
In the papers filed to the court, it is stated there were certain instances of staff ransacking certain stores due to non-payment of salaries.
“This situation presents a potential risk for recurrence and is a matter of significant.”
Puma pulls out
The court papers include an interdict from the company’s major supplier, Puma South Africa. The court ordered the company to not sell Puma products, and to remove the products from public display.
However, an agreement was reached between Puma and the practitioners.
“The business rescue practitioners negotiated with Puma and amended terms leading to an agreement which Puma consented to the respondent [the company] resuming the sale of Puma products on the basis that the income derived would be divided between Puma and the respondent [the company].”
Nike and Adidas
Other suppliers started to send the company legal threats to have their products being pulled out of the stores.
The company’s financial destress is also blamed on Nike SA and Adidas SA’s decision to establish mono stores. A mono store, also known as a single-brand store sells products from only one brand.
The establishments of these stores become direct competition for the company, which lowered the business’ turnover.
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Beginning of financial woes
The owner of Frame Leisure Trading, Mark Frame has attributed the impact of Covid-19 pandemic, and the 2021 mass looting as the beginning of the company’s financial destress.
Then key creditors changed payment terms from 90 days to 60 days, while some opted for 30 days. “This change strained the company’s cash flow and limited its ability to manage operational expenses effectively.”
The lootings resulted in 50 stores being affected, while 6 were shutdown. The acknowledged the compensation from Sasria, however, it was labelled ‘insufficient’ to cover the losses.
Hope of life
However, after news broke that the business rescue practitioners have filed for liquidation of the company, a consortium made a R80 million offer.
A consortium, Connecting Creativity told Business Tech that it has made an offer to the practitioners. One of the consortium’s members, claims to be owed roughly R16 million.
The offer was made weeks before the application was filed. “Connecting Creativity knew that the BRPs were considering liquidating the business as Standard Bank, a major creditor, did not believe in the viability of the business plan.”
If the deal goes through, Connecting Creativity will take over the existing operational stores. The large portion of their R80 million offer will be used to negotiate with the landlords and restock the stores. While there would be an immediate injection of R7.5 million.
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