๐Ÿ”’ Steinhoff settlement proposal is sensible, say industry experts

Thys du Toit, one of the founders of Coronation Fund Managers, is well-known for his stance on corruption in South Africa. He made headlines again recently with a video in which he pleads with President Cyril Ramaphosa to open up the economy for businesses that are struggling to stay afloat. In this piece, Du Toit joins BizNews editor-in-chief Alec Hogg and David Shapiro to discuss the latest proposal made by scandal-tainted Steinhoff this week. – Claire Badenhorst

On Monday 27 July, the Steinhoff group stated that it would offer R16,5 billion to resolve 90 separate claims against it, following the accounting fraud scandal which erupted in 2017. In his Rational Radio webinar held the same day, Alec Hogg asked SAโ€™s favorite stock market commentator, David Shapiro, to weigh in on the settlement proposal.

“They have a big stake in Pepkor store and they’re using Pepkor shares to try and settle some of the claims against them,” Shapiro remarks.

“What they are saying is if the full claims are made against them, they will not survive. If they are able to reach a settlement, they’ll be able to remove the contingent liabilities off their balance sheet. What that means is we can get on with running the business with what we’ve got. As long as contingent liability hangs on the business, there’s always a chance that they can’t progress. No one’s going to lend them money and no one’s going to raise money against those things which are overhanging them. So, I think that’s what they’re trying to get rid of.”

Thys du Toit, chairman of Rootstock Investment Management, said he believes the proposal is a sensible one.

“Keep in mind that there are 90 claimants,” says Du Toit. “The total amount that’s been claimed is โ‚ฌ7bn, and that does not include bank debt. If you actually include all the bank debt, it’s a lot more – north of โ‚ฌ10bn. So, the likelihood that Steinhoff can go belly up is significant.”

“I actually think it’s a significant achievement by Louis du Preez and the board and all their colleagues to have come forward with a settlement.” – Thys Du Toit

“My advice to them would be to accept it,” says Du Toit. “Otherwise, it’s going to go into liquidations and then the banks will stand in front of the queue.”

Shapiro agreed. “It’s a long, hard task to get back to anywhere close to where they were – if they ever do get there.”

It will be a long, hard task to build up Steinhoff back to anything that resembles the once-impressive retail empire, is the message.

Du Toit notes that former Steinhoff CEO Markus Jooste, who presided over financial irregularities that erupted and pushed the company close to collapse three years ago, is still walking free.

The settlements on average are about 12c in the rand with some getting as much as 36c in the rand, he said.

For the full webinar, visit BizNews on YouTube here.