High noon for soon to be delisted Steinhoff as ownership moves to creditors
Steinhoff has run out of room to manoeuvre. The troubled retailer will be delisted from the JSE and the Frankfurt Stock Exchange, and ownership will move from shareholders to creditors, which are mostly hedge funds.
The writing has long been on the wall as far as the demise of Steinhoff goes.
The beleaguered retailer has to pay back €10.2-billion (about R200-billion) to its creditors by the end of June — money it doesn’t have.
Steinhoff’s debt is so large that it is 400 times more than its value on the JSE, with the company being worth R469.6-million.
The shares of Steinhoff, once a bellwether in the retail sector and a must-have in investment portfolios, are now a penny stock and have eroded value for many shareholders. Just this week, Steinhoff crashed by 64% to reach a paltry 8c.
Something had to give, as Steinhoff ran out of options for survival in its current shape or form. Realising it would never be able to pay off its debt, Steinhoff approached a court in Amsterdam to have a plan approved that would drastically restructure the retailer and end it as we know it.
The alternative to restructuring is worse, as Steinhoff would hurriedly close and launch a fire sale of its assets through a liquidation process.
But the court in Amsterdam, where Steinhoff is registered, has paved the way for the retailer to avoid the liquidation process by approving the restructuring plan and allowing it to be implemented before the end of June.
This will see the retailer delisted from the JSE and the Frankfurt Stock Exchange. Ownership of Steinhoff will also move from shareholders to the creditors to which it owes billions of euros and rands, and the company will then be transferred into a trust.
Steinhoff creditors, which are mostly hedge funds, will take over about 80% of the company’s shares in exchange for a three-year debt repayment holiday. So, the creditors will not get paid the amounts they are owed until at least 2026.
Shareholders could get 20% of what is left of Steinhoff, according to the restructuring plan, and will be last in line to get any amounts they are owed. They are likely to walk away with nothing.
The battle for Steinhoff
The road to getting the restructuring plan, now approved by the court, has been a rocky one.
Almost 90% of Steinhoff shareholders voted against the plan in May as they didn’t want more shares in the company and opted to be bought out of the company. This is because Steinhoff’s shares are worthless and have lost 96% of their value since 2017, when the company’s auditors, Deloitte, refused to sign off its accounts as fraud was suspected.
The shares of Steinhoff peaked at R96 in 2016, but crashed to 6c by 22 June.
Now that the court has approved the restructuring plan, it is binding on all parties. Steinhoff creditors supported the plan because they always intended to sell the company’s assets to get what was owed to them.
Steinhoff assets include its more than 44% ownership of retail group Pepkor (owner of Ackermans and Pep), 72% of European discounter Pepco, and a furniture retail firm in Australia.
Steinhoff has already started to sell assets, including its entire stake in Mattress Firm (an American mattress store chain) to Tempur Sealy International for about $1.2-billion in cash (R22-billion).
David Shapiro, chief global equity strategist at Sasfin Wealth, said efforts since 2017 to keep Steinhoff alive and restructure its operations have been futile.
“The only people who have made any money out of Steinhoff are the advisors, lawyers that have put the cases in court and the firms that have tried to restructure it. They have made fortunes while shareholders have lost money,” Shapiro, who sold out of Steinhoff long before its implosion, told Business Maverick.
“Why Steinhoff kept operating is bizarre. Looking at the share price, you will see that shareholders are going to walk away with nothing.”
Another Steinhoff shareholder agreed with Shapiro, saying “there is absolutely no rescue prospect” for the company.
“There’s no value for shareholders, and there won’t be any recovery prospects. I think the creditors themselves, along with the shareholders, will have to take a haircut.”
Arrest warrant for Jooste
In a separate court case in Germany, it seems the law is finally catching up with former Steinhoff CEO Markus Jooste, the alleged mastermind behind the accounting fraud at the company.
According to Bloomberg, authorities in Germany – where Steinhoff has its primary listing and where a case of accounting fraud is under way – have issued an arrest warrant for Jooste. He failed to appear in court twice, reportedly blaming his lack of a passport.
Read more in Daily Maverick: Ex-Steinhoff CEO hit by arrest warrant after trial no-show
Bernd Gross, Jooste’s German lawyer, told Bloomberg that the ruling is “totally incomprehensible” and that he will challenge it. If the ruling is left unchallenged, or if the appeal process fails, Jooste could be extradited to face the music in Germany.
German prosecutors charged Jooste with the false representation of financial statements and for encouraging other Steinhoff companies to falsify accounts.
In South Africa, Jooste faces no charges despite a PwC forensic investigation putting him at the centre of the accounting fraud. DM