The Cross Trainer, a prominent South African athleisure and sneaker retail chain, is heading toward liquidation after nearly three decades in operation. The company, facing mounting financial difficulties, was placed under business rescue in August 2024. Despite efforts by the appointed Business Rescue Practitioners (BRPs), George Nell and Gideon Slabbert, the company’s fate has been sealed due to an inability to secure critical post-commencement financing. This article examines the role of BRPs in the context of this high-profile liquidation.

Business Rescue Process Overview

Business rescue, as provided for under Chapter 6 of the South African Companies Act (71 of 2008), is designed to assist financially distressed companies in reorganising and restructuring their affairs with the primary objective to maximise the likelihood of continued business existence. In cases where this is not possible, business rescue aims to ensure a better return for creditors than would result from an immediate liquidation.

The BRPs were appointed in mid-August with the mandate to stabilise the business and attempt a turnaround. Their role involved assessing the company’s financial situation, engaging with creditors, and attempting to secure post-commencement financing. The BRPs’ duties are to act impartially, ensuring that the interests of all stakeholders, including creditors and employees, are considered while attempting to revive the business.

Key Challenges in The Cross Trainer’s Rescue

One of the critical factors leading to the BRPs’ decision to liquidate The Cross Trainer was the failure to secure R10 million in post-commencement financing. The BRPs reportedly approached at least 14 institutions to secure funding but were unsuccessful. The absence of this crucial financing significantly impaired the ability to implement a viable business rescue plan.

Moreover, external market factors such as the economic fallout from the COVID-19 pandemic, shifting consumer behavior, and increased competition in the retail sector exacerbated the company’s financial distress. Suppliers also shortened payment terms from 90 to 30 days, further straining liquidity.

The Decision to Liquidate

When a business rescue practitioner concludes that there is no reasonable prospect of rescuing the company, the practitioner must apply for liquidation. In the case of The Cross Trainer, the BRPs acknowledged that they could not publish an amended business rescue plan acceptable to creditors, prompting the move toward liquidation.

In their report, the BRPs noted that the company was burdened with more than R300 million in debt, while turnover post-business rescue was only around R7 million per month. The worsening financial conditions, alongside the withdrawal of key landlords, made it clear that business rescue was no longer feasible.

Conclusion

The role of business rescue practitioners in The Cross Trainer case showcases the complexities involved in attempting to save a distressed company. While the BRPs took all reasonable steps to secure financing and stabilize the business, market conditions and structural issues within the company itself ultimately led to the decision to liquidate. This case highlights the importance of timely intervention, adequate financial support, and the necessity for realistic business rescue plans to avoid liquidation in future distressed business scenarios.