CARNAGE! Steinhoff share price plunge NEARS 90% as debt cut to junk

JOHANNESBURG — The carnage relating to furniture retailer Steinhoff’s secondary listing on the JSE has continued today. The share price has plunged nearly 90% in recent days as it reels from an accounting scandal as well as the exit of CEO Markus Jooste. At the time of writing, a Steinhoff share costs just R8.76 and is down just over 12% already in trade. On its primary listing on the Frankfurt Stock Exchange, Steinhoff’s share price at the time of writing is just 0.62 – Gareth van Zyl

By Renee Bonorchis and Janice Kew

(Bloomberg) — Steinhoff International Holdings NV shares extended losses to more than 88 percent since the start of an accounting scandal that’s threatening the survival of the global furniture and clothing retailer.

The stock slumped a further 41 percent in Frankfurt on Friday after Moody’s Investors Service slashed the credit rating by four notches to junk late on Thursday, highlighting “the uncertainties and implications for the company’s liquidity and debt capital structure.” Almost 10.3 billion euros ($12 billion) has been wiped off the value of the company since Wednesday.

A Steinhoff International Holdings NV logo sits on display outside the company’s offices in Stellenbosch, South Africa. Photographer: Waldo Swiegers/Bloomberg

Moody’s decision comes as a South African financial regulator starts a probe, adding to a review by Johannesburg’s stock exchange and an investigation in Germany, where Steinhoff moved its primary listing from South Africa two years ago. The owner of Conforama in France, Mattress Firm in the U.S. and the U.K.’s Poundland said late Tuesday that Chief Executive Officer Markus Jooste had quit after the discovery of accounting irregularities, although Chief Financial Officer Ben La Grange remains in place.

‘No Way Back’

“There’s no way back,” David Shapiro, deputy chairman of Sasfin Wealth in Johannesburg, said in emailed comments on Friday. “The worry is that there are a huge number of operating companies within the stable – if you were a supplier to these businesses would you sell goods on credit? I reckon they should file for Chapter 11 or business rescue and try and salvage what they can.”

pwcSteinhoff has its roots in South Africa and has expanded aggressively around the world with a series of acquisitions, including Mattress Firm and Poundland, and now has 130,000 employees worldwide. It’s hired PwC to examine the financial wrongdoing, postponed the publication of full-year earnings and put non-core assets up for sale.

The retailer’s biggest shareholder is billionaire Chairman Christo Wiese, who has stepped in to take temporary charge of the company. He hasn’t yet responded to requests for comment.

The yield on its 800 million euro ($914 million) bonds due January 2025 rose 150 basis points to 11.26 percent. The shares recovered slightly by 10:10 a.m. in Frankfurt, trading 3.4 percent lower on the day at 0.575 euros.

Taking Steps

Steinhoff said Thursday that it’s considering boosting liquidity by selling assets worth at least 1 billion euros and reviewing the recoverability of non-South African assets worth a further 6 billion euros. The retailer has scheduled a meeting with the lenders of two of its syndicated debt facilities for Monday, according to three people familiar with the matter.

The Pretoria-based Financial Services Board has started an independent probe into possible false and misleading financial reports, while the Public Investment Corp., Steinhoff’s second-largest shareholder and a manager of South African government-worker pension funds, said it’s awaiting information from investigations. The PIC owns a 10 percent stake in Steinhoff, which is now worth $1.1 billion less than two days ago.

South African Finance Minister Malusi Gigaba said he’s “mindful” that many retirement and savings funds will be hurt by the loss in value and has asked the PIC to prepare a report on the extent of the exposure.

“I think it is the end,” Simon Brown, Johannesburg-based chief executive officer of trading company JustOneLap. “The end will be a break up. There are lots of decent businesses that others will want to buy and it’s likely they’ll fetch decent prices. so staff will mostly be fine, except in head office.”

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