JD Group Climbs as Retailer Finds a Buyer for Lending Unit

JD Group Ltd., the South African furniture retailer controlled by Steinhoff International Holdings Ltd., gained in Johannesburg as investors took encouragement from the sale of its lending unit.

JD said yesterday it agreed to sell the division to an international consumer-finance provider in a deal that will reduce future funding requirements at the Johannesburg-based company. The shares rose as much as 6.9 percent to 24 rand.

“JD Group doesn’t want to fund the book and this allows it to focus on its retailing and product range,” Mark Hodgson, an analyst at Cape Town-based Avior Capital Markets Ltd., said by phone. “It won’t necessarily restrict lending to consumers any more than JD Group would have had it kept the business.”

The transaction provides a boost for the unprofitable company, which has struggled with rising bad debt in its consumer finance operation and raised about 1 billion rand ($93.5 million) through a rights offering earlier this year. The offering was underwritten by furniture maker Steinhoff, whose stake in the retailer now stands at about 86 percent.

South African consumers have been struggling to repay loans amid high unemployment and slower economic growth. Ellerine Holdings Ltd., another furniture retailer, which was owned by African Bank Investments Ltd., applied for business rescue, akin to Chapter 11 bankruptcy, last month as losses mounted amid falling sales and increasing bad debt.

JD shares closed 2.5 percent higher at 23 rand, the highest price in two weeks. They’ve fallen 21 percent this year while the FTSE/JSE Africa General Retailers Index has gained 9.4 percent.

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