End of Steinhoff: ‘give them hell’

• Shareholders dig in their heels and reject debt restructuring

Steinhoff’s future hung in the balance on Wednesday after shareholders of the embattled retail holding firm voted against the debt restructuring deal, substantially raising the prospect of liquidation, which is likely to leave nothing on the table for equity investors.

Under the deal, shareholders would have left with 20% in an unlisted vehicle while debt holders would take 80% of the firm and extended the debt repayment date for three years. Shareholders were told there was no guarantee the 20% would have any value but it was their best hope.

However, 61.45% of shareholders voted against the deal at a shareholder meeting in

Amsterdam on Wednesday afternoon. Steinhoff warned beforehand that such an action would leave them with no stake at all in the company.

The outcome of the vote could herald the end of Steinhoff, which has been touch and go for more than five years after revealing multibillion-rand accounting fraud, which triggered a selling frenzy in its shares and attracted the hedge fund investors in its debt as riskaverse traditional lenders fled.

Steinhoff, which is registered in the Netherlands, is labouring under €10bn (or almost R200bn) debt pile due in June that it cannot pay. It now will either go into a Dutch court-type procedure called WHOA (Court Approval of a Private Composition Prevention of Insolvency) Act used to avoid bankruptcy and come to an agreement with creditors. Or creditors, mostly hedge funds, will take what is owed to them in June.

Steinhoff, which owns 44.5% of Pepkor and 75% of European discount retailer Pepco as well as stakes in US Mattress Firm and Greenlit brands, an Australian furniture seller, has €3.5bn in negative equity, meaning its debts exceed its assets by €3.5bn.

Auditor Mazars said it was not a going concern, meaning it was unable to meet its financial obligations.

Before the vote, the company had said if the debt reorganisation plan failed to get over the line, there could be a fire sale of assets by creditors, a scenario under which the seller rarely gets a good price. However, it is likely the hedge funds that own its debt will take time to unwind the firm and realise as much money as possible.

Once a must-have in fund managers’ portfolios, Steinhoff has been preoccupied over the past five years forestalling bankruptcy after revealing a multibillion-rand accounting fraud that sent its share price crashing and triggered lawsuits worth R184bn by 8,000 shareholders who said they had been duped into buying worthless shares.

CEO Louis du Preez managed an almost miraculous R24bn settlement, which was finalised in January 2022, before turning his attention to the company’s mountain of borrowings.

In December, he struck a deal with 64% of lenders under

which they will take an 80% stake in the company in exchange for extending the June 2023 repayment deadline.

“On a personal level, this has been a really difficult journey. You wake up in the morning, [and] there’s no one that wishes you well. Everyone wants to fight with you and today is no different than the last five-and-a -half years or so,” Du Preez said.

Marc Liebscher, a lawyer at Dr Späth & Partner in Berlin, who has taken German financial regulator BaFin to court and instituted a class action against auditors Ernst & Young in the Wirecard fraud case, said he would fight Steinhoff and fight against using courts to go into bankruptcy protection.

“Are you aware this will be our pet project for the next 10 years? We will fight. We will fight in the Dutch court against the WHOA (bankruptcy) proceedings,” he told the shareholder meeting, which was livestreamed on the web.

“Are you aware that our war chest for lawyers is filled to the brim? I represent around 1,800 shareholders and I’m sure after today it will be even more. Be rest assured. We will prevent this robbery from happening”.

One shareholder named Nicholas Vosswinkel said to Du Preez he could not believe after he had negotiated so many settlements that eventually hedge funds calling in debt had outplayed Steinhoff.

“You have done an amazing job,” he said to Du Preez.

But when news that lenders would take over the company was revealed in December, he said it was more than a punch to the stomach. “And I lost all the faith I had in you.”

Vosswinkel lambasted the hedge funds that demanded at least 80% of the firm with no discount on the debt, despite buying the debt for less than they were owed.”

“Give them hell. Give them real hell,” he said.

CEO LOUIS DU PREEZ MANAGED AN ALMOST MIRACULOUS R24BN SETTLEMENT, WHICH WAS FINALISED IN JANUARY 2022