Steinhoff’s interfirm transactions add difficulty

HARD TO CONVEY REAL SITUATION

Steinhoff provided an update on Friday showing just how complex the organisation’s financial affairs have become when the liabilities from intercompany loans, external financing and the mounting claims being lodged by vendors and shareholders are taken into account.

The announcement and accompanying copy of the presentation published on its website followed a presentation executives were making to lenders on Friday.

The company estimates that it will achieve revenue for the half-year of €9.4 billion, €100 million more than the preliminary restated revenue for the same period last year.

The Ebitda margin is expected to be between 4% to 5%, meaning the company should be generating profits to begin meeting its debt obligations of just €423 million.

There was more confirmation of the extent of the accounting irregularities though, with the company stating that “the group’s historical profits were materially overstated”.

Steinhoff is expecting to incur a loss for the half-year, exacerbated by a litany of issues relating to its withdrawal of previous years’ financial statements and the launch of a forensic investigation into these matters.

These included impairments, capital losses on asset disposals to generate funds, and higher interest costs.

The conventional institutions that were providing loans to the group were replaced by new lenders demanding higher compensation for the increased risk in lending to Steinhoff.

In the copy of the presentation to lenders made available on its website, Steinhoff reiterated the precarious and potentially fatal situation it’s in.

“The liquidity position of the group’s key finance companies is not sustainable beyond the next few months,” it bluntly pointed out.

Steinhoff said its group finance companies, which include Steinhoff Europe AG, which holds the lion’s share of debt (€4.9 billion) and Steinhoff Finance Holding GmbH (€2.7 billion), were at a de facto standstill with its lenders.

“A number of facilities having not been rolled over or extended recently,” the company stated.

Both entities are wholly owned subsidiaries of Steinhoff International Holdings NV, which is the parent company domiciled in the Netherlands, with its primary listing on the Frankfurt Stock Exchange.

Total debt of the group is €9.6 billion, a reduction from the €10.7 billion stated at its meeting with lenders in December 2017.

Subsidiary Mattress Firm directly and indirectly owes Steinhoff Europe AG €2.5 billion.

This, together with the mounting shareholder and vendor claims, makes the process of untangling the true size of the liabilities a difficult job.