Star rises as it bucks trend of retailer pressure
Steinhoff Africa Retail (Star) bucked a trend of pressure on retailers on Wednesday, closing 2.22% higher on news it had raised sufficient new funding to both clear its Steinhoff-related debt and to finance opportunities for growth.
Star — whose retail brands include Pep, Ackermans and Tekkie Town — raised R18bn from South African financial institutions. The bulk of the finance, R16bn, was used to repay shareholder funding provided by Steinhoff International Holdings at the time of Star’s JSE listing in September 2017.
Star was wholly owned by Steinhoff until the listing when 23% of the company was sold to investors. Steinhoff has sold off a further 6% stake in recent months in a bid to secure funds to repay some debt. The repayment of the Steinhoff loans has allowed Star to cancel all the related third-party guarantees.
Star CEO Leon Lourens said the refinancing provided a platform from which the group could grow its business to its full potential. “We appreciate the confidence the banks have placed in us in this regard.”
Star’s 2017 results, which were released on December 4, revealed it had R11bn in longterm loans due to Steinhoff and its subsidiaries.
There was a further R4.9bn in short-term loans.
At the time, the board told shareholders the debt had been introduced as part of the listing process. The shares traded at R21.52 on the day of the listing and reached a high of R25.71 on December 1, just days before Steinhoff’s announcement about “accounting irregularities”.
That announcement caused the shares to plunge to a low of R15 before recovering to a high of R22.53.
The continuing uncertainty about Steinhoff and the possibility it will be forced to sell off more of its Star holdings has ensured downward pressure on the Star share price. One of the group’s debt funders told Business Day on Wednesday that the Star share price had been oversold and was one of the “very good” assets in the Steinhoff portfolio. In a presentation to lenders on Friday, Steinhoff estimated the value of its 71% stake in Star at about €3bn.
It noted that the valuation was based on a number of brokers’ estimations. The brokers included Absa, Deutsche Bank and Investec.
Also on Wednesday, Star announced that PwC had been appointed as the group’s external auditor to replace Deloitte with immediate effect. Lourens said that after careful consideration and by mutual agreement with Star management and its audit committee, Deloitte had decided to resign.
“A significant component of the Star group was already audited by PwC and using two auditors simultaneously caused an inefficient duplication of efforts,” he said.
Deloitte is Steinhoff’s external auditor whose work over the past three years is part of an investigation by PWC.
The latest moves by Star are a continuation of its determination to distance itself from the troubles that have destroyed shareholder value at Steinhoff.