Struggling stationery and books retailer CNA has been placed in business rescue, director Olinka Nell said on Tuesday.
CNA, which has about 160 stores, has failed to pay its landlords and struggled to sell stock as it faces weak consumer demand and intense competition from other retailers, as well as companies that sell stationery directly to schools.
Nell said the board decided to put CNA in business rescue after the “directors looked at all options and decided this would be the prudent way forward”.
It suggests the company’s recent attempts to raise new finance to bail it out have not been successful.
Business rescue is a legal process that stops creditors from claiming money owed to them while professionals investigate if and how the company can be saved.
The ailing retailer was sold by Edcon, former owner of Edgars, to Astoria Investments and Benjamim Trisk, former Exclusive Books CEO. in February 2020, just before Edcon went into business rescue.
After bills mounted and CNA sales failed to materialise at the beginning of the school year, its peak season, Trisk, a 30% shareholder, tried to place the company in business rescue. This led to a fallout with his management team, who claim he approached rescue practitioners without their consent.
In May, as the tension between the directors intensified, Astoria sold its 70% stake in CNA to Nell and Rob Shortt, who had worked at Exclusive Books with Trisk, and Nazir Patel, former MTN CFO.
Trisk left his CEO role in May following the fallout and was removed from the board of directors a week ago.
The business rescue process will be led by attorney Tashya Giyapersad and Simi Maharaj.
Trisk told Business Day he had been proved correct.
“I pointed out to the board a month ago that we had to do something and address the situation, and nothing was done until now,” he said.
The Companies Act stipulates that companies cannot continue to trade while insolvent or if they are unable to pay suppliers and creditors for a sustained time.
Retail analyst Chris Gilmour said to survive, CNA would have to be slimmed down. “The number of stores would have to be significantly smaller, say around 20 to 30.”
However, he cautioned that “very few companies emerge from business rescue.”
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