Crisis-hit Daybreak’s IT services suspended over nonpayment

• Daybreak Foods can no longer access its IT services due to nonpayment to supplier Altron Digital Business.
• Its recently appointed business rescue practitioner says the suspension has impacted email, payroll, and communications.
• Altron says it was forced to suspend services after Daybreak failed to keep to the terms of a settlement agreement.
• For more financial news, go to the News24 Business front page.

The business rescue practitioner (BRP) for crisis-hit chicken producer Daybreak Foods has almost immediately run into a roadblock after the group’s IT services were temporarily suspended for nonpayment.

Daybreak, which employs around 3 000 people, was placed into voluntary business rescue two weeks ago after a mass culling of starving chicks by the National Council of Societies for the Prevention of Cruelty to Animals (NSPCA). Business rescue allows it to restructure by giving it a reprieve from creditors and suppliers calling in debts.

BRP Tebogo Maoto said on Thursday that Altron Digital Business (ADB), a subsidiary of the JSE-listed IT group Altron, had suspended the group’s IT services.

“The temporary shutdown of the IT services ... has negatively affected the business rescue proceedings in respect of the due diligence process, communication to employees, payroll services, payment of critical suppliers, and email services,” he said.

Maoto said the inability of him and his team to access a full suite of IT services was making the job difficult.

“The suspension is also negatively affecting the [...] team’s ability to perform statutory duties to investigate historic information stored in the cloud managed by ADB.“

Maoto said that Daybreak paid R1.4 million late last month to try to get its IT services up and running and avoid disruptions. However, this was not enough to lift the suspension.

ADB confirmed that it had temporarily suspended the chicken producer’s IT services. It said that while it had received some payments, these did not fully meet the terms of a settlement it concluded earlier this year to address Daybreak’s outstanding debt.

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The company said nonpayment had been a “persistent challenge” over the past 12 months, during which it had continued to provide services while it tried to hash out a solution.

“Daybreak Foods’ continuous nonadherence to the agreed terms of the settlement agreement had left ADB with no alternative but to temporarily suspend services,” it said.

ADB said it was in “active discussions” with Maoto and his team to try to find a solution – possibly involving something like a grace period to let essential business services continue.

Maoto, too, tried to sound upbeat, saying he was confident an “amicable solution” with ADB would be found. Other suppliers had been willing to grant the BRP team a grace period, he said.

News24 understands the IT suspension may be linked to Altron’s demand that it receive upfront payments for services.

Maoto aims to publish the first version of his business rescue plan for Daybreak — which presentations to staff refer to as a “stabilisation plan” — by mid-August. He will then convene a second meeting of creditors to vote on and approve the plan.

The plan is expected to include new investment from a strategic equity partner that will take over some of Daybreak’s shareholding. Earlier this week, Maoto told creditors that he had already received three unsolicited offers from would-be strategic equity partners.

While Daybreak is privately run, it is still wholly owned by state institutions. The Government Employees’ Pension Fund, the Compensation Fund, and the Unemployment Insurance Fund each own a third of the chicken producer. Their investments are managed by state asset manager the Public Investment Corporation.

The NSPCA, meanwhile, is still investigating the company for alleged contraventions of the Animals Protection Act following the mass starvation and cannibalism of chicks.

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