Creditors’ support boosts Steinhoff
• Key European financial entities in group win backing for restructuring plan and the freezing for three weeks of any claims
News that Steinhoff had secured support from the majority of key creditors saw the share price surge 50% to a high of R1.66 in early morning trade on Thursday as short sellers moved to cover their positions. During the day the share price eased back to close just 13% firmer at R1.29 as it became evident the group remains in a tight financial situation.
News that Steinhoff had secured support from the majority of key creditors saw the share price surge 50% to a high of R1.66 in early morning trade on Thursday as short sellers moved to cover their positions.
During the day the share price eased back to close just 13% firmer at R1.29 as it became evident the group remains in a very tight financial situation.
The support has been provided to the key entities in the Steinhoff web, namely Steinhoff Europe (SEAG) and Steinhoff Finance Holdings, which are the principle finance companies of the group’s European business.
In a Sens statement issued early on Thursday, Steinhoff said about 61% of SEAG’s external creditors were supporting the plan and the majority of the holders of Steinhoff Finance Holdings’s total convertible bonds had agreed to back the plan. The support has been provided for just three weeks to June 30, the day after the interim results are due to be released.
The support measures are intended to help stabilise SEAG and Steinhoff Finance Holdings and provide the group and its creditors with sufficient time to work on the details of a restructuring plan.
The two companies have limited operations of their own but in the financial 2016 accounts were valued at over R190bn. In a presentation to lenders in mid-May, Steinhoff warned that the two companies were vulnerable to insolvency risk.
On Thursday, Steinhoff told investors that SEAG and Steinhoff Finance Holdings had historically been used to raise finance to support the group’s European and US businesses and consequently had large primary debt obligations that needed to be resolved as part of any restructuring plan.
“The going-concern risks that SEAG and Steinhoff Finance Holdings currently face arise due to their current levels of indebtedness and rules imposed on directors of indebted companies under the relevant local laws,” said Steinhoff.
In exchange for freezing for three weeks any claims they have over SEAG and Steinhoff Finance Holdings, the creditors are entitled to a pro rata contingent fee payable in kind upon the successful completion of the restructuring plan.
The creditors that are party to the support plan have agreed that during the three weeks they will not petition for any action that would cause SEAG or Steinhoff Finance Holdings to enter into solvency proceedings.
They have also agreed not to seek to accelerate payment of all or any part of the debt or to bring legal proceedings against any member of the Steinhoff group.
The creditors who are supporting the plan have agreed not to transfer any of their rights in respect of SEAG and Holding to other investors without doing their best to ensure the recipients agree to the terms of the support plan.
Although the level of support is strictly defined, it provides a welcome respite for the Steinhoff board, which has been inundated with threats of legal action from affected parties, including subsidiary Steinhoff Africa Retail.