Steinhoff International Holdings NV is seeking a three-year extension on most of its €9.6bn ($11.3bn) of debt as the retailer battles to come to grips with an accounting scandal that’s wiped more than 96% off the share price.
The owner of Conforama in France and Mattress Firm in the US presented an initial restructuring plan to creditors in London on Friday it said is “essential” for the company to survive. Steinhoff proposed its holding company debt be extended and that it pay no cash interest, except on loans of the Hemisphere real estate unit.
The company has hired PwC to probe its finances after reporting a hole in its accounts of more than €6bn, with the outcome expected by the end of the year. In the meantime lawsuits are mounting, with ex-chairman Christo Wiese suing the company for 59bn rand ($4.6bn). Chief executive officer Markus Jooste has quit and the company has vowed to bring those responsible for the wrongdoing to justice.
Advisory fees related to legal issues, restructuring costs and investigating the financial irregularities pushed Steinhoff into the red in the six months through March, the company said in a statement. Impairments and losses taken on asset disposals have also weighed on the retailer’s bottom line, it said. Sales rose 1% to €9.4bn.
The company’s fall from grace comes after a rapid expansion in which it bought Pepkor, Africa’s biggest clothing chain, from Wiese in 2015. Aside from Mattress Firm, Steinhoff also acquired Poundland in the UK and Fantastic Holdings in Australia. As part of a review of the business, Steinhoff rated its companies around the world based on criteria including whether they need funding and if there’s any buyer appetite.
The review found that Mattress Firm and Austrian furniture retailer Kika and Leiner need a cash injection. At the other end of the spectrum, Conforama is seen as sellable but not yet at the right value, while Poundland and Pepkor Europe have been rated stable and marketable.
Here are the main findings:
The company’s restructuring plan aims to treat all the debt raised at Steinhoff’s holding companies as equal, restating it at par value. The company will start negotiations with creditors from next week to get a consensual agreement on the overhaul, or it will apply for court processes in Austria, the UK or the Netherlands.
Steinhoff also provided for the first time a snapshot of its inter-company loans, which could impact on the valuation of debt sitting on different parts of its capital structure.
Steinhoff Finance Holding GmbH, the issuer of €2.7bn of convertible bonds, is owed €1.7bn by Hemisphere and its international and European holding companies, while it has €1.9bn of loan payables to the South African divisions, according to the presentation. Titan Premier Investments Pty Limited, a company external to the group and related to Wiese, also owes Steinhoff Finance Holding GmbH about €200mn.
Steinhoff Europe AG, which borrowed €4.9bn from banks and funds, has €3.7bn of loan receivables and €1bn of payables to other internal units, it said in the presentation.
FTI Consulting is working with bank lenders and hedge funds Attestor Capital and Davidson Kempner Capital Management, which bought bank debt and contributed new loans after the December disclosure of accounting irregularities.
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