Wiese’s claim is challenged
R24BN: RELATES TO FUNDS BORROWED FOR SHARES
CFO admits the group is technically insolvent.
It was a case of “lots more of the same” from Steinhoff’s 2019 annual financial statements. The fragile corporate entity that is Steinhoff International lives to fight another year – and pay out more eye-watering fees to armies of legal and financial advisors.
In 2019, it continued to be technically insolvent and exist in the shadow of a qualified opinion from its auditors.
And the highlights of the 2019 statements continue to be the list of troubling related-party transactions that runs to pages, as well as a long roll call of legal claims.
Since December 2017, the most interesting sections of Steinhoff’s results are not the dry figures contained in the annual financial statements but the long notes to those statements.
The web of related-party interests made a mockery of claims to be King Code-compliant by a board stacked with corporate dignitaries.
Then there was the list of legal claims against Steinhoff, which featured surprising numbers of high-profile SA business executives.
And this year comes news that a previously little-known entity, Conservatorium Holdings, has laid claim to part of Christo Wiese’s claims against Steinhoff.
Note 22.3 to the Steinhoff Investments financial statements refers to claims by Wiese-controlled entities Thibault and Upington Investments. The claims relate to the R24.69 billion that was invested in Steinhoff shares around 2016 when Steinhoff’s primary registration was transferred to the Netherlands. That investment is just under half the R59 billion claim Wiese lodged against Steinhoff in April 2018.
It seems the 2015 purchase of 314 million Steinhoff NV shares, which was done in Upington’s name, relied heavily on bank loans and that Conservatorium has emerged as the owner of some of an undisclosed portion of those loans.
One analyst described the latest figures as more evidence that Steinhoff is a “zombie company”.
He said that with the group spending another R3 billion on legal and financial advisory fees in the 12 months to end-September 2019, it was difficult not to suspect the company was being kept alive merely to generate fees for bankers, lawyers and auditors.
In addition to the advisors’ fees, the creditors are being paid out almost €1 billion (R19.1 billion) a year for agreeing to freeze their claims until December 2021.
The group’s chief financial officer Theodore de Klerk says calls for liquidation of the group might seem reasonable, but that “it’s difficult to sell any of the large assets because of the uncertainty about underlying claims.”
He said in December 2017 Steinhoff was centrally funded.
The restructuring put in place since then means that all the operations – Pepkor, Conforama, Mattress World, Pepco and Greenlit Brands – are now independently funded.
And, says De Klerk, generated “pretty healthy” earnings in 2019.
He acknowledges the group is technically insolvent but says that from a liquidity perspective it is still a going concern.
It’s difficult to sell any of the large assets