Steinhoff scandal grows

Steinhoff International revealed that its accounting errors stretch back into 2016, highlighting the extent of wrongdoing that’s led to an unprecedented stock slump over the last week.

Earnings for this year and last will have to be restated, the retail giant said in a statement on Wednesday, prompting the shares to slide anew. The issues relate to “the validity and recoverability of certain Steinhoff Europe balance-sheet assets.”

The announcement comes days before Steinhoff is due to meet with banks to navigate a way out of its crisis, which has wiped more than €10 billion off the value of the company. At stake is the future of a retailer with 130 000 employees and international brands, including Mattress Firm in the US, Poundland in the UK and France’s Conforama.

Markus Jooste has quit as CEO, and Steinhoff appointed auditor PricewaterhouseCoopers to probe accounting irregularities.

The Public Investment Corporation, the second-largest shareholder with a 10% stake, questioned the independence of the board and said billionaire chair Christo Wiese may have a conflict of interest.

Wiese, who has seen his wealth more than halve in a little more than a week, is running the company on an interim basis.

Steinhoff is staring down the barrel of more than €9 billion of long-term debt. That includes a €2.5 billion term loan due in March 2018. Steinhoff has been seeking breathing room from its lenders amid the market rout. Wiese has been trying to negotiate a standstill agreement on a margin loan of €1.5 billion. And the company has gained the support of some key lenders for extra time to repay more than €1 billion owed on a revolving credit facility.

The accounting revelations led to a plunge in its shares, erasing about three-quarters of their value. Steinhoff said last week it was considering boosting liquidity by selling assets worth €1 billion.– Bloomberg