ABSA Stakes ZAR10bn on Edcon’s Private Label Store Card Portfolio

ABSA have taken over retailer Edcon’s private label credit program in a deal that will ensure a long term relationship between the two.  The alliance will see Edcon retain the customer relationship while ABSA will provide credit underwriting and funding.
 
The Edcon store card business operates primarily in South Africa (approximately 94% of net receivables), with smaller operations in Botswana, Namibia, Swaziland and Lesotho.  While it is the intention of ABSA Bank (or one of its affiliates) to acquire these portfolios in the neighbouring countries, it is not a condition precedent to the South African transaction.
 
The ZAR10 billion transaction (approximately £777 million) couldn’t have come at a better time for Edcon as the leading clothing and footwear retail group in southern Africa are heavily indebted and face a June 2014 deadline whereby it needs to repay or refinance around ZAR11 billion of Eurobond debt.
 
The company will use around R3.5 billion of the capital to repay RMB which funded the portfolio in the first place with the remainder being used to repay the Euro bondholders; make further investments into the business and cover transaction fees and expenses.
 
“The transaction represents an important component of Edcon’s strategic plan and will facilitate growth, both in SA and the rest of Africa, by allowing for a greater focus on core retail operations and providing a more efficient funding structure to grow credit sales,” the company said.
 
First Annapolis was lead adviser to Edcon and Bain Capital, while KPMG Director of Corp Tax, Roula Hadjipaschalis advised Edcon on tax matters related to the sale of their store credit card business.   KPMG is a global network of professional firms providing Audit, Tax and Advisory services.  They have 145,000 outstanding professionals working together to deliver value in 153 countries worldwide.