Steinhoff International Holdings’ share price more than halved on Thursday after the beleaguered retail holding company said its main debtholders will take majority control, leaving shareholders with no more than 20% and possibly even nothing.
The shares closed the session 64% lower at 58c, as investors scrambled to unload the stock, with just over 56.7-million shares traded. The stock is down almost 90% this year.
The group’s debt of about €10bn, that was due in June next year, is held by various lenders and exceeds the value of the group’s assets, according to Steinhoff.
The company announced on Thursday morning it has reached agreement with 64% of lenders to extend the repayment deadline. The deal will leave shareholders with 20% of the firm while the debt holders will control 80%.
Should shareholders not agree to the debt extension deal, they could lose all of their equity.
“If Steinhoff International shareholders agree to the maturity extension transaction, they will retain 20% of the economic interest in the post-closing equity of the group, with the financial creditors being entitled to receive the balance. If they do not agree, shareholders will no longer have any interest in the group,” the company said in a statement.
The lenders will also have 100% of the voting rights, leaving shareholders with no influence as the holding company gives up its main listing on the Frankfort stock exchange and its secondary one on the JSE.
The firm’s debt is financed at about 10% interest a year, high by European standards — requiring its underlying retail businesses to grow at that just to keep up with the interest.
Steinhoff owns just over 50% of SA retail firm Pepkor, a majority stake in European discounter Pepco, and Mattress Firm in the US as well as an Australian household goods manufacturer Greenlit Brands.
It planned to list Mattress Firm in US this year to raise funds but markets worldwide have been depressed as interest rates rise.
“While the outcome is disappointing for shareholders, it was not unexpected given the high debt burden and negative equity value,” said Chris Reddy, a portfolio manager and equity analyst at All Weather Capital.
"Unfortunately equity markets were not helpful for a Mattress Firm IPO, which could have helped reduce some of the debt.”
Steinhoff hopes at least 80% of its lenders will have agreed to the debt restructuring terms by the end of the year. Those lenders who agree to the settlement will be entitled to an early-bird fee.
In a separate statement on Thursday, Steinhoff Investments the group’s wholly owned subsidiary, said EPS for the year to end-September are expected to more than double to between 25,000c and 27,000c from 11,685.5c a year earlier.
Headline EPS, which strips out one-time and exceptional items are seen rising to between 26,000e and 28,000c from to 11,843.6c.
Update: December 15 2022
This story includes the company’s closing share price
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