May 8, 2020 / 5:39 PM / 19 days ago

South Africa's Phumelela Gaming enters business rescue

JOHANNESBURG, May 8 (Reuters) - South Africa’s Phumelela Gaming and Leisure on Friday joined a slew of distressed firms to file for business rescue - a local form of bankruptcy protection - after a nationwide lockdown suspended activities in the horse racing industry.

Phumelela, of which former Steinhoff International CEO Markus Jooste was a director and among its largest shareholders, has not been able to stage race meetings since the end of March due to the lockdown.

This has hurt its revenue from racing and betting, the company said in statement.

“... the best option to ensure the long-term survival of the company and the sport of horse racing, is to implement a business rescue plan,” Phumelela said.

South Africa’s business rescue process, which aims to shield a business from the demands of its creditors while an independent advisor attempts to turn it around, borrows from U.S., British, Canadian and Australian law.

But business rescue is uniquely South African in terms of its timetable, ranking of preference among stakeholders and the involvement of labour.

On March 26, President Cyril Ramaphosa imposed a five-week lockdown to curb the spread of coronavirus. Non-essential activities including sports and entertainment were forced to suspend operations.

This has hammered businesses in Africa’s most advanced economy, forcing a raft of companies to cut jobs and seek immediate help from the government.

Investment holding firm Labat Africa Ltd said on Friday it had placed its subsidiary Force Fuel into business rescue due to depressed volumes of wholesale fuels.

In the last two weeks prominent companies such as Comair , which operates the British Airways franchise in South Africa and owns budget airline Kulula, and non-food retailer Edcon have filed for business rescue citing the adverse impacts of the pandemic.

Debt-laden carrier state-owned South African Airways (SAA), which filed for business rescue in December, is already struggling to survive after the pandemic brought its operations and revenue to a halt.

SA Express, another state-owned carrier, has also been placed under “provisional liquidation” last Tuesday after the airline’s administrators said rescue efforts, which began in February, weren’t likely to succeed.

Earlier on Friday, chrome mining and minerals producer Afarak Group said it will voluntarily enter Afarak Mogale and Afarak South Africa in a business rescue process “as a consequence of the imposed restrictions and the relevant economic impacts.”

Most of the restrictions on leisure, entertainment or anything that requires mass gathering are still in place under a partial lifting of lockdown that was put in place from May 1.

National Horseracing Authority (NHA) CEO, Vee Moodley, said on Thursday the industry, “which is on the verge of collapse”, is asking the government to give it permission to resume controlled closed horse racing during level 4 lockdown restriction in order to save the majority of the 60,000 jobs.

Phumelela said the firm had received a proposal from a third party regarding a loan once business rescue proceedings started.

Phumelela, based at Turffontein Racecourse in Johannesburg, operates four race courses, five training centres and over 200 betting outlets. It also manages two race courses and betting outlets in the Western Cape on behalf of Kenilworth Racing.

Reporting by Nqobile Dludla Editing by Promit Mukherjee and David Evans

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