Bridge Loans Liquidation

Bridge Loans Liquidation

News recently emerged that micro lending company Bridge Loans had filed for urgent liquidation. This follows reports surfacing in August 2005 of the company going under. Many critics of the micro lending industry in South Africa have warned against reckless lending and the implications that this may have on consumers as well as on the industry.

Over the years, Bridge Loans has established a reputation as a leader in the microfinance industry. With over 120 branches, the institution has made their services easily accessible to a range of individuals.

Statistics about loans in South Africa have revealed that many consumers are drowning in debt and that household debt accounts for as much as 75% of income. This may be a contributory factor to the downfall of Bridge Loans.

What is liquidation?

Liquidation is the process by which a company is brought to an end and the assets and property of the company are redistributed. Liquidation occurs when a company is insolvent, meaning that it cannot pay its obligations. When a business is liquidated it implies that the business will cease to operate.

What caused the Bridge Loans Liquidation?

What led to the possibility of liquidation was the emergence of the news that weeks before Bridge declared themselves to be in financial distress and in need of business rescue. The directors converted their shares in a highly irregular manner, which ultimately left many shareholders out of pocket.

Bridge Loans’ debtors book is currently valued at between R154 million and R186 million, which is considerably lower than the R1.6 billion owed to Bridge and Onecor investors.

“We are not ready to give up on Bridge  and our investment in Bridge and will therefore do whatever we need to in order to avoid a liquidation and all that comes with such a drastic step,” said interim Bridge CEO Ryneveld van der Horst.

Categories: Loans