Pick n Pay is technically insolvent and has breached all its debt covenants, which shows the retailer is in serious financial trouble.
The poor performance took its toll on the retailer’s balance sheet as it had to significantly increase debt to fund operations. Pick n Pay’s interest on debt costs it R2.4 billion a year. The company’s net debt-to-EBITDA increased from 1.1 times to 6.3 times. Pick n Pay has also breached its second debt covenant, which states that its EBITDA must be at least 3.5 times greater than its net interest expense.
Simply put, if Pick n Pay cannot repay its debt, lenders can sell Boxer to cover the money they are owed.Pick n Pay announced that the Ackerman family would give up control of the company after being at the helm for over 50 years. Pick n Pay chairman Gareth Ackerman said the past year has been one of challenge, disappointment, and encouraging renewal.
Nine months after the launch of Ekuseni, the Pick n Pay board reversed its strategy and brought back former chief executive Sean Summers to fix the mess.