Since JSE-listed Basil Read announced its entering into business rescue in June, it has secured R265-million in funding and its business rescue practitioners (BRP) have, this week, published a business rescue plan.

The company’s appointed BRPs – Siviwe Dongwana and John Lightfoot – believe the construction division of Basil Read can be successfully turned around, with an improvement in cash flow anticipated by the end of a two-year period in which the company will complete construction contracts, for which it will use the R265-million in funding.

Upon completing these contracts, the company will be able to pursue any claims it has that are associated with any of the contracts.

A meeting of creditors to approve the business rescue plan will be held on September 3.

Should the plan not be approved and adopted, liquidation proceedings will follow.

Despite the company experiencing trouble, 17 of the construction contracts the company has secured will continue, with only two being cancelled.  

The contracts are made up of buildings, civils and roads contracts.

Building contracts include the construction of new schools in Cape Town, for the Department of Education by October 31; the construction of a new taxi holding facility for the Johannesburg Development Agency by September 30; the construction of miscellaneous buildings for Eskom’s Medupi power station by September 30; and the construction of a new magistrate’s court in Port Shepstone by October 31.

Civil contracts include work at Eskom’s Kusile and Medupi power stations, due between April 30 and September 30, 2019; the construction of a new railway signalling system for the Passenger Rail Agency of South Africa by June 30, 2019; the construction of a water treatment plant for Umgeni Water by March 30, 2019; and the manufacture of a lime handling plant for Rand Water by September 30, 2019.

Roads contracts include the rehabilitation of TR31 in the Western Cape for the Department of Transport; the construction of freeways and bridges near Coega, for Transnet by September 30; and upgrades to the N61 and the construction of Musina ring road, both for the South African National Roads Agency.

Meanwhile, there has been ongoing engagement between Basil Read and the St Helena government regarding its airport construction, which has been proven to have unresolved issues. It is estimated that the contract review process will take about two months, with completion targeted for end-November.

CASH FLOW ISSUES BACKGROUND

Engineering News Online previously reported that Basil Read’s construction division has, for some time, been experiencing cash flow difficulties emanating from, among others, mismatched cash inflows and cash outflows.

The company attempted to raise bridge funding from a consortium of lenders for the finalisation of its construction contracts.

However, following protracted negotiations, the company was advised that the majority of the consortium of lenders were not prepared to make bridge funding available to Basil Read in an informal process, outside of business rescue.

Without this funding, the board determined that Basil Read would be facing circumstances constituting “financial distress” and started voluntary business rescue proceedings.

Basil Read in March reported a net loss after tax of R1-billion for the year ended December 31, as a result of a number of lossmaking legacy contracts, the write-off of goodwill in the roads division and the reversal of deferred tax assets in lossmaking entities.

At year-end, the group’s current liabilities, at R2.1-billion, exceeded current assets, at R1.4-billion, and the group’s cash had decreased to R126.4-million.

Basil Read started operations in 1952.