Trade in the shares of embattled construction group Group Five has been suspended after the company’s board resolved to place the group, as well as Group Five Construction Proprietary Limited (G5 Construction), into business rescue.
Group Five announced in a note to shareholders that it would appoint David Lake and Peter van den Steen, of Metis Corporate Advisory, as business rescue practitioners for each of Group Five and G5 Construction.
"The requisite documents were lodged with the Companies and Intellectual Property Commission (CIPC) on 11 March 2019 and the company and G5 Construction await confirmation of filing from the CIPC," Group Five said in a statement released on Tuesday morning.
The JSE granted Group Five approval for the immediate suspension of trading in the company's shares.
"The board considers this decision to be prudent and in the best interests of shareholders while the company and its business rescue practitioners seek pre-commencement finance to address the financial distress of the Group Five group and explore solutions to the current situation facing the Group Five group.
"Shareholders are further advised that there is a slim chance for any realisation of value. However, the board of directors of Group Five will continue to assess any expressions of interest as communicated previously to shareholders."
Group Five has been experiencing cash flow difficulties as a result of significant operating losses and negative cash flows from G5 Construction and its direct and indirect subsidiaries.
To alleviate the cash flow constraints, bridge funding of R650-million was sought by G5 Construction from a consortium of lenders, which was granted in April 2018.
Its financial constraints were exacerbated, however, following the calling of the guarantees in issue of $62.7-million in November 2018 and $43.8-million in December 2018, relating to the Kpone gas-fired power station contract, in Ghana, which the client terminated in November last year.
On February 22, G5 Construction sought additional bridge funding from the lending consortium, which was declined on March 4 on the basis that the Group Five group's balance sheet and income generating capabilities were insufficient to successfully service and repay existing debt and any further debt incurred.
“Absent this bridge funding, and having obtained the prerequisite legal and accounting advice, the board of directors of the company has determined that Group Five and G5 Construction were, or would be facing, circumstances constituting 'financial distress' within the meaning of the Companies Act No 71 of 2008," the company said in its statement.
“As a result, the board of directors of Group Five and G5 Construction have resolved to place each of these companies into business rescue in accordance with Chapter 6 of the Companies Act."
G5 Construction was currently conducting retrenchment proceedings. The company's 2018 annual report stated that it had 7 394 employees across all units, 5 766 of whom worked for the construction unit.
Group Five's shares closed at 89c on Monday, having traded above R40 in 2014.