After months of work untangling years of fraudulent transactions, Steinhoff has turned its focus to multibillion rand lawsuits triggered by the scandal that threatens the survival of the global retail group.
Steinhoff uncovered a €6.5bn (about R110bn) hole in its accounts in 2017, causing a share collapse and multiple lawsuits from former business partners and aggrieved shareholders that include former chairman Christo Wiese.
"The key to this is to sort out the litigation. No one is going to speak to you about a new capital structure when litigation is hovering over you,” CEO Louis Du Preez said on Tuesday during an investor presentation in Cape Town.
With a stake of about 20% acquired in 2014 when he sold his company Pepkor to Steinhoff in exchange for shares, Wiese suffered the most from the share price collapse. Steinhoff's share price crashed on December 6 2017, when Markus Jooste resigned as CEO and the company said it had picked up "accounting regularities". Jooste has denied any wrongdoing.
Wiese has put in a claim worth R59bn, or about 12 times more than Steinhoff's value but roughly the equivalent of the market capitalisation of Pepkor.
Wiese has previously said he is open to talks about his claim.
“Steinhoff's future obviously depends on there being some sort of resolution to the litigation," said retail analyst at Bloomberg Intelligence, Charles Allen.
Steinhoff, which is registered in the Netherlands, is also facing a class action lawsuit from Dutch shareholder group, VEB, which is seeking an unspecified compensation for damages suffered from misleading information about the financial health of the company.
The company is pursuing its own claims against various entities involved in suspicious transactions. These include legal proceedings to recoup €300m from an entity that allegedly benefited from dubious transactions and another R858m civil claim against Jooste.
“If I was a Steinhoff shareholder, I wouldn't expect civil litigation to be a pot of gold,” he said, adding criminal proceedings would take precedence over civil claims.
DEBT RESTRUCTURE
“The longer-term issue is their debt, " Allen said. "Unless there is a miracle involved with all the businesses in which they have already sold stakes, the value of the remaining operating businesses that they have doesn't seem to equal what their debt is."
Steinhoff is inching to closer to implementing a debt restructuring plan under the so-called company voluntary arrangement, or CVA, a UK legal process that enables a financially distressed company to ring fence its historic debt and continue trading.
Under the CVA with creditors, Steinhoff wants to restructure equity-linked bonds into new secured loans. The deadline for the CVA has been repeatedly pushed back and is now scheduled to be completed by August 19.
Given that the value of Steinhoff's assets -- which have been written down by more than €13bn -- is much lower that its borrowings, Allen said he expected the company to undertake a debt-to-equity swap.
"Realistically, it would almost certainly be in a way that the existing shareholders would be left with almost nothing,” Allen said.
Steinhoff, which owns furniture factories, properties and car dealerships, is also exploring the sale of additional non-retail assets as part of plans to become an investment holding company focused on retail. Some of the proceeds from the divestments are likely to be used to pay down debt.
motsoenengt@businesslive.co.za
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