The business rescue practitioners (BRPs) of Group Five Construction and Group Five Limited, Dave Lake and Peter van den Steen of Metis Strategic Advisors, have confirmed the formal termination of the business rescue proceedings of both companies following the substantial implementation of the adopted business rescue plans.

When business rescue proceedings began in March 2019, Group Five faced about R7-billion in creditor and contingent exposures, more than 2 300 creditors, 119 active projects and close to 6 000 employees employed in 180 companies across 38 countries.

Independent analysis by PwC at that time calculated that, in the alternative scenario of an immediate liquidation (as opposed to business rescue), secured creditors would receive as little as 65c in the rand and concurrent creditors only 3.4c in the rand, with no prospect of any shareholder recovery.

Following the termination of the business rescue proceedings, the company says the picture today is “materially different”.

The BRPs confirm that all secured and preferent creditors have been paid in full and that all concurrent creditors have been paid in full, or funds for their payment have been fully provided for in accordance with the adopted plans.

In addition, the company says structured implementation of both plans has preserved substantial employment and has now positioned Group Five to potentially deliver a surplus return to its shareholders once all residual matters have been finalised.

“This outcome materially exceeds the liquidation alternative that was modelled at the commencement of business rescue,” says Lake.

“The process has over-achieved in its primary objectives: maximising recoveries for creditors and lenders, saving jobs and business entities, settling tax obligations, likely unlocking some value for shareholders, while stabilising and restructuring a highly complex group in an orderly manner.”

From the outset, Group Five says the strategy was to avoid a disorderly collapse and to preserve viable value wherever possible.

Of the 119 construction projects underway at the start of the business rescue proceedings, 101 (about 85%) were successfully managed through to completion or preservation. This significantly reduced further bond calls, damages claims and value erosion.

In parallel, the company notes that about 60 entities and asset sale processes within Group Five were completed. Key subsidiaries, including Intertoll Europe and Everite, were sold as going concerns, rather than being forced into closure, with achieved proceeds materially exceeding all pre-business rescue value expectations.

A central outcome of the process was the protection of jobs wherever possible. At the start of business rescue, the group employed about 5 862 people. Group Five says less than 15% of those employees were retrenched over the past six years.

In many cases, it notes, employees transitioned with businesses that were sold, allowing operations, and livelihoods, to continue under new ownership beyond the restructuring itself.

Beyond the immediate impact on Group Five itself, the company says the broader economic implications of the restructuring have been significant.

“At a time when South Africa’s construction sector has experienced prolonged contraction and the failure of several major contractors, an uncontrolled liquidation of a group of this scale would have placed further strain on already fragile supply chains, subcontractors and infrastructure delivery,” the company says.

By implementing a structured and phased rescue process, Group Five says the BRPs were able to reduce the risk of a cascading impact across projects, suppliers and communities linked to those projects.

“Our mandate under the Companies Act was to deliver a better outcome than liquidation, and to do so in a manner that ‘balances the rights and interests of all relevant stakeholders’.

“That meant protecting value where it was sustainable, safeguarding employment where viable, and ensuring that the broader economic ecosystem was not destabilised,” Lake adds.

With the substantial implementation of the business rescue plans now complete, Group Five enters a finalisation phase focused on concluding a few asset sales, resolving residual outstanding litigation, managing long-tail contractual obligations and resolving residual corporate matters such as audits, tax and collapsing the large multinational group structure.

Where surplus value remains after all obligations have been settled, it may be returned to shareholders, the company says.

Group Five says, in complex business rescue processes of this scale, shareholder recoveries are uncommon, particularly where liquidation modelling initially projected no possible return.

While any potential distribution to shareholders remains subject to the resolution of residual matters and conservative provisioning, the prospect of surplus value reflects the disciplined execution of the restructuring process, it notes.

“The conclusion of business rescue marks an important milestone for Group Five,” says Group Five CFO Anthony Clacher.

“Our focus during the finalisation phase, post business rescue, is on responsibly concluding the remaining matters, maintaining appropriate oversight, and ensuring that all residual obligations are managed prudently on behalf of stakeholders.”