Light at end of tunnel! Steinhoff creditors in fresh move to keep company afloat

EDINBURGH — South African multinational Steinhoff has been teetering on the brink of collapse since late last year. Revelations of gross financial irregularities in Germany sparked a share price rout. Since then, investigators in other countries have been unpicking an elaborate web of financial deals designed to fool shareholders and creditors into believing an ambitious global acquisition strategy was sustainable and sensible. Former CEO Markus Jooste jumped ship soon after it became clear he could no longer hide his dirty secrets from the world. But others at Steinhoff have been implicated, with big questions about how it is that the directors failed to spot signs of trouble. In the meantime, creditors have pulled together to try to keep the company afloat. That is welcome news to the many thousands employed by the company around the world as well as shareholders who have been holding on in the hope that the company will rebound. – Jackie Cameron

By Luca Casiraghi

(Bloomberg) – Steinhoff International Holdings NV won support from a majority of its key creditors for a standstill agreement through the end of June, giving the scandal-hit retailer breathing space to avoid insolvency proceedings.

The so-called “support letter” for Steinhoff’s restructuring plan is the first step taken by creditors toward a debt agreement with the South African company, which in December reported accounting wrongdoing that wiped more than 96 percent off its market value. Steinhoff, which owns Conforama in France and Mattress Firm in the U.S., told investors last month it wants a three-year extension of most of its 9.6 billion euros ($11.3 billion) of debt with no cash interest paid for the period.

A company sign stands above the Steinhoff International Holdings NV company headquarters in Stellenbosch, South Africa. Photographer: Dwayne Senior/Bloomberg

The supporting creditors include more than of half the holders of Austria-incorporated Steinhoff Finance Holding GmbH’s 2.7 billion euros of convertible bond – as well as 61 percent of Steinhoff Europe AG’s 5.8 billion euros debt, the company said in a statement late Wednesday. The creditors also include Steinhoff units that that are owed money by the two subsidiaries.

The group agreed they will not bring legal proceedings or enforce their rights under their holdings, the company said. Other creditors may join the accord, which will reduce “going concern” risks under Austrian insolvency laws, it said.

The shares fell 3.1 percent on Wednesday in Frankfurt, where Steinhoff moved its primary listing from Johannesburg in 2015.

Support Fee

The creditors will be entitled to a fee payable with more debt at completion of the restructuring process, according to the statement.

Bank lenders and hedge funds Attestor Capital and Davidson Kempner Capital Management, which bought bank debt and contributed new loans after the December accounting disclosure, are working with adviser FTI Consulting. Convertible bondholders including Centerbridge Partners, Silver Point Capital Management and York Capital Management are being advised by Houlihan Lokey Inc.

Holders of 800 million euros of bonds due January 2025 and funds that bought bank loans issued out of the Steinhoff Europe AG, including Och-Ziff Capital Management, are working with adviser PJT Partners.

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