‘We continue to fight for what’s right and we trust the system’ – Bernard Mostert on the Steinhoff settlement saga

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Bernard Mostert sits down with BizNews founder Alec Hogg to discuss the ins and outs of the Steinhoff settlement saga, a litigation battle which is seemingly coming to a close after nearly four years. The Steinhoff share price has been on a rollercoaster ride the last few weeks, having doubled from R2 to R4 in a matter of weeks before nosediving more than 20% on the local bourse today. Below, Tekkie Town co-founder Bernard Mostert provides clarity on the legal proceedings, as Judge Slingers ruled in favour of Mostert and co in that liquidation proceedings against Steinhoff can proceed. Below that, an article on the matter by our partners at Bloomberg as well as today’s Steinhoff Stock Exchange News Service announcements have been added for completeness. – Justin Rowe-Roberts

Bernard Mostert on the reasons for pursuing Steinhoff to be liquidated: 

I think it is important to recognise that we don’t have a liquidation order yet, effectively the ruling by Judge Slingers allows us to proceed with our liquidation application. Last week we spent three fairly exhausting days in court and we heard on three matters. The first was the attempted entry of the financial creditors, the people who bought the distressed debt off after the revelation of a fraud. They wanted to join and oppose the liquidation bid, but their application to join was dismissed with costs. Then there was an application from the two Dutch administrators who also wanted to join in opposition to the liquidation bid and their attempt to join was also dismissed with costs. And then finally, there was quite a long and intense debate as to whether South Africa would have the necessary jurisdiction to liquidate an external company. Now it’s easy to assume that it’s logical that Steinhoff was a South African entity that went offshore. Most of the fraud occurred in the entity before it went to the Netherlands. And as a result, there was a big debate as to whether the South African courts and specifically the Western Cape High Court would have the right to proceed in hearing as to whether the company can be liquidated. And that point was also ruled in our favour, again with costs. So on Thursday the show gets on the road so to speak, when ourselves and Jan Lamprecht, another party that is intervening in support of the liquidation, gets to be heard in the Western Cape High Court. And at this stage, it will run from this coming Thursday (9 September) until the 20th of September over various dates – not continuous.

On why the financial creditors are opposing the liquidation of Steinhoff:

Who they are was part of a big debate last week, because the argument was that they were not properly identified. But to take you to the beginning, Steinhoff goes along merrily from 2008 or 2009 – it has various lenders that provide finance to the company, very much like how you and I would apply for a bond if we needed one or a form of finance. A general banking facility in our businesses. Then Steinhoff fails to publish its financial results. Markus Jooste resigns. The company announces that there were accounting irregularities and that they will be launching a forensic investigation. At that time arguably all of the creditors who had instruments in which Steinhoff owed them money sold those instruments at discounts – the central Bank of Europe was one that held some of the Steinhoff bonds and they sold them at a discount. These were bought predominantly by hedge funds and hedge funds who specialise in distressed debt opportunity. So it’s not the typical person from whom you would get a bond or general banking facility. And they then struck a deal with Steinhoff’s management in which seemingly they said we hold this debt, we need to restructure it. The debt was euro denominated, and in order to make you keep going and not to bring actions against you, we want a new interest rate, 10 percent, which is astronomical for Europe. And we want to be paid 100 cents of what the original debt was, regardless of whether we bought it 10 cents, 20 cents or 30 cents, we want to get 10 percent interest and we want to get the full amount.

Steinhoff ex-chairman backs legal settlement as claimants vote

(Bloomberg) – Steinhoff International’s ex-Chairman Christo Wiese said he’s supportive of the company’s plan to resolve more than $8bn of legal claims and will vote in favour of a settlement offer.

The South African retail tycoon, who was also the biggest shareholder in scandal-hit Steinhoff, has been among certain creditors locked in negotiations about the terms of the proposed settlement.

“Some matters needed greater certainty,” Wiese, 79, said by phone Monday. “A workable solution was reached.”

The former billionaire didn’t provide details of the issues that have been resolved, nor say whether other claimants would vote to pass the deal. “The settlement is a step in the right direction,” he said.

Financial creditors and other investors seeking compensation for the collapse in value of their Steinhoff stock in 2017 voted on the deal Monday. Wiese and other so-called contractual claimants will cast their ballots at a rescheduled time on Thursday.

In the year since Steinhoff announced the original $1bn settlement proposal, there have been efforts by various claimants to squeeze more out of the deal and the company improved the terms of its offer in July. The company is battling to resolve the matter almost four years after auditors refused to sign off on its accounts, leading to the discovery of a litany of inflated profits and asset values.

Should a majority of creditors vote in favour, the deal will still have to be ratified by a South African court and a separate Dutch process approved. Lancaster Group, owned by former Steinhoff director Jayendra Naidoo, and the founders of South African shoe retailer Tekkie Town, which Steinhoff bought in an all-stock deal in 2016, said they would opt out of voting on the settlement to pursue legal challenges.

Steinhoff SENS statement: 

Disclosure of inside information pursuant to Art. 17 of the EU market abuse regulation (EU 596/2014, MAR)

Update on S155 meetings

Steinhoff International Holdings N.V. (“SIHNV” or the “Company” and together with its other subsidiaries, “Steinhoff” or the “Steinhoff Group”) and Steinhoff International Holdings Proprietary Limited (“SIHPL”) provide the following update on the implementation of the Steinhoff global litigation settlement proposal.

Today, two of the three creditors’ class meetings were held in relation to SIHPL’s proposal in terms of section 155 of the South African Companies Act, 71 of 2008 (the “S155 Proposal”).

As previously announced and explained, the S155 Proposal proposed three classes of claimants for voting: the SIHPL Financial Creditors; the SIHPL Market Purchase Claimants (“MPCs”); and the SIHPL Contractual Claimants.

As announced earlier today, pursuant to an order of the Western Cape High Court in South Africa made on Sunday, 5 September 2021, the meeting of the SIHPL Contractual Claimants has been postponed to Thursday, 9 September 2021 at 11am (SAST) or such time thereafter as determined by the Chairman.

The Board of SIHPL is pleased to report that its S155 Proposal has obtained sufficient support to pass the applicable statutory thresholds for approval (a majority in number representing at least 75% by value) from the SIHPL Financial Creditors and the SIHPL MPCs at their respective meetings.

The Company has a primary listing on the Frankfurt Stock Exchange and a secondary listing on the JSE Limited.

Steinhoff SENS statement: 

Disclosure of inside information pursuant to art. 17 of the EU market abuse regulation (EU 596/2014, MAR)

Update on global litigation settlement proposal 

Steinhoff International Holdings N.V. (“SIHNV” or the “Company” and together with its other subsidiaries, “Steinhoff” or the “Steinhoff Group”) together with Steinhoff International Holdings Proprietary Limited (“SIHPL”) provide the following update on the implementation of the Steinhoff global litigation settlement proposal.

Update on SIHPL S155 Meetings

As previously announced and explained, SIHPL’s proposal in terms of section 155 of the South African Companies Act 2008, as published originally on 16 February 2021, and subsequently amended, the most recent amendment being announced on 11 August 2021 (the “S155 Proposal”) proposed three classes of claimants for voting: the SIHPL financial creditors; the SIHPL market purchase claimants (“MPCs”); and the SIHPL contractual claimants.

Meetings of all three classes of SIHPL creditors were scheduled to take place on Monday 6 September 2021. Pursuant to an order of the Western Cape High Court in South Africa made on Sunday 5 September 2021, the creditors’ meeting of the SIHPL contractual claimants has been postponed to Thursday, 9 September 2021 at 11am (SAST). It is intended that the meeting (at 10am SAST) of the SIHPL financial creditors and the meeting of the SIHPL MPCs (at 1pm SAST) will take place as scheduled on Monday 6 September 2021.

The order of the High Court follows an urgent application brought by Steinhoff against Titan and its affiliated entities seeking to compel them, pursuant to a settlement support agreement, to exercise their votes in favour of the S155 Proposal at the meeting of the SIHPL contractual claimant class and to prevent them from voting against the S155 Proposal. The Court found that the application was urgent and has set out a timetable for further submissions. At the same time the Court ordered that the meeting of the SIHPL contractual claimants class is to be postponed until 11am on Thursday, 9 September 2021.

Updates in relation to the S155 Proposal

Steinhoff announces the following updates in relation to the S155 Proposal that are being disclosed prior to the SIHPL MPC and SIHPL financial creditors meetings:

PPH Shares in the Second Portion of SIHPL S155 Settlement Consideration

Under the terms of the S155 Proposal, Steinhoff will provide settlement consideration in two portions on the bases of –

(i) a first portion equal to 50 per cent of the total consideration payable in cash; and

(ii) a second portion equal to 50 per cent of the total consideration payable in PPH shares (at R15 per share) or a greater amount in cash.

Steinhoff has been considering its options in respect of the second portion of settlement consideration in view of the recent PPH share price and the possibility that such second portion will be settled in cash.

In respect of that second portion of the settlement consideration (the “Second Settlement Portion”):

(1) On or before 5pm (Johannesburg) on 8 September 2021, any SIHPL S155 contractual claimant or any SIHPL MPC, may notify SIHPL in writing (via email to [email protected]) that it wishes to elect to receive the Second Settlement Portion by delivery of PPH Shares at the Settlement Spot Price and in discharge in full of the Second Settlement Portion, in which case the Second Settlement Portion shall (subject to the occurrence of the Settlement Effective Date, and in accordance with the S155 Proposal) be satisfied accordingly. If no election is made by an eligible claimant then its second portion is expected to be settled in cash.

(2) For these purposes, the “Settlement Spot Price” will be R19.82 per PPH share.

(3) Any PPH Shares so received by a claimant pursuant to the election (the “Election PPH Shares”) shall be subject to a lock-up of 180 days from the date on which the Election PPH Shares are transferred to the claimant.

(4) Any such election by a SIHPL contractual claimant or a SIHPL market purchase claimant may only be made in respect of the full amount of its Second Settlement Portion and not in part. Any fractional share entitlement shall be rounded down. Any regulatory matters arising as a consequence of the transfer by Steinhoff to the transferee or the direct holding by the claimant shall be at the claimant’s risk and any tax matters arising from the transfer of the Election PPH Shares by Steinhoff will be for the account of the claimant transferee. The form of exchange and discharge documentation to be completed by the claimant will be made available upon it making such election will be available from SIHPL following notification of its election. Rights to vote, receive dividends, and any other rights relating to Election PPH Shares will only arise on transfer of legal title of such shares to the relevant electing claimant.

For the avoidance of doubt, the Second Settlement Portion does not apply to the BVI and Cronje 7 SIHPL contractual claims (as defined and referred to in the S155 Proposal), the terms of which remain as announced by Steinhoff on 3 September 2021.

Amendments to the proposed SIHPL/Titan Loan

As described in the S155 Proposal, on the Settlement Effective Date SIHPL, Titan Premier Investments (Pty) Ltd (“Titan”) and Thibault Square Financial Services (Pty) Ltd (“Thibault”) will enter into a payment agreement on terms summarised in the S155 Proposal (the “Payment Agreement”). Subject to resolution of the litigation with Titan affiliates described above, SIHPL intends to amend, and SIHPL has sought (but not yet received) confirmation of sufficient support from SIHPL financial creditors in accordance with the proposed SIHPL Intercreditor Agreement (which will come into effect on Settlement Effective Date) to consent to amend, the terms of the Payment Agreement immediately following the Settlement Effective Date, as follows:

(1) the “Payment Date” under the Payment Agreement will be amended to the first business day after the tenth anniversary of the date of the Payment Agreement; and

(2) the applicable interest rate (referred to as the “Specified Rate”) under the Titan Payment Agreement will be zero. Other maturity and payment dates under the SIHPL finance documents (including the S155 Settlement Note) will be amended to remain at the originally expected date of 5 years 6 months after the Settlement Effective Date.

Update on Hamilton

Support SIHNV refers to its announcement of 11 August 2021, in which it confirmed the in-principle support of the active claimant group, Hamilton. Steinhoff confirms that Hamilton entities have now entered into a settlement support letter with SIHNV and SIHPL to confirm their support for the Steinhoff global settlement proposal. The settlement support terms agreed by Hamilton do not extend to the arrangements in place with the third parties (the former auditors and D&O insurers) which remain to be finalised between those parties. The Hamilton settlement support letter includes provision for a contribution of €500,000 in respect of legal costs incurred by Hamilton in the course of the recent S.45 proceedings and the class composition proceedings before the High Court of South Africa.

The securities referenced herein have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the United States absent registration under the Securities Act or pursuant to an applicable exemption from the registration requirements thereunder.

The Company has a primary listing on the Frankfurt Stock Exchange and a secondary listing on the JSE Limited.

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