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SHOW US R250M NOW, BANKERS TELL SEARDEL

Bankers to Seardel appear to have issued a serious indictment on the clothing and textile firm by refusing to retain the group’s existing borrowing facilities if it does not raise at least R250 million in a rights offer.

The banks’ position can be read as an indication that lenders are taking a more guarded approach towards sectors that are showing strain, given the high interest rates and subdued consumer spending.

These new terms were outlined in a circular to Seardel shareholders last month after the JSE-listed group announced in June that it would launch a R300 million rights offer that, subject to certain conditions, would result in Hosken Consolidated Investments (HCI) assuming control of the company.

Seardel majority shareholder Aaron Searll, the non-executive chairman and former chief executive, yesterday blamed Seardel’s predicament on the slowdown in retail trade, high levels of imports from the Far East and higher interest rates affecting financing costs.

The lenders “felt we needed some more money to come into the company. I don’t agree with them, but, you know, bankers sometimes get a bit twitchy,” he said, indicating the discussions had taken place over the past few months. He would not disclose the bankers’ identities.

He said net capital reserves were R1.5 billion, while borrowings were “no worse” than at in December, when Seardel’s bank overdraft sat at R110 million and interest-bearing liabilities at R208 million.

Because of higher interest rates, Seardel paid R14 million more in finance charges than in the previous interim period.

The bankers’ stipulation resulted in HCI offering to underwrite the rights offer to the value of R200 million.

HCI chief executive Johnny Copelyn, who sits on Seardel’s board, said the banks wanted Seardel to remain within “prudent” borrowing limits.

He said a R100 million loss projected by Seardel for the year to June would wind up in debt.

“The fact that the board feels there should be a rights issue says the board itself feels there needs to be less debt,” Copelyn said. “The company did need to be recapitalised following the losses made.”

Chinese imports, worth about R12 billion last year, have been blamed for the woes of the local clothing and textile sector.

Minority shareholders have in the past aired unhappiness about head office expenses and Searll’s controlling management style. He handed over to Walter Simeoni, the respected former managing director of Frame Textile, earlier this year. Seardel acquired Frame in 2000.

Shareholders are due to vote on Friday whether to waive the mandatory offer to minorities that is usually triggered by a change in control. If successful, this would pave the way for the rights offer, in terms of which shareholders will be given the option to acquire 6.66 new Seardel shares at 50c a share for every share held.

Source: Business Report – Ingi Salgado