Steinhoff’s a black box too big to ignore for vulture investors

LONDON: Steinhoff International Holdings NV may look like a non-starter for most investors: its former chief executive is under investigation for fraud and the new managers still can’t explain what went wrong. Then there’s the matter of what happened to US$5bil in cash.

Yet buyers have piled in. Hedge funds now hold most of € Steinhoff’s 3.5bil (US$4.3bil) of € bonds and more than 1.5bil of bank loans and private debt, according to four people familiar with the situation who asked not to be identified because the matter is private.

Their bet: a global retailer with businesses on four continents must have enough assets to offset losses they still don’t know about. What’s more, such fat targets don’t come around often enough for distressed-debt specialists to let Steinhoff go without taking a bite.

“If you are a big distressed-debt fund, then you must buy it, even if it’s little more than a blind punt,” Louis Gargour, owner of Londonbased credit fund LNG Capital, who said Steinhoff’s finances were too opaque and complex for him to touch. “There are few opportunities as big as Steinhoff out there.”

Steinhoff cratered on Dec 6 after acknowledging financial irregularities. Its stock plunged more than 90% and in the aftermath the billionaire Christo Wiese quit as chairman and authorities in its home base of South Africa undertook an investigation.

Three months on, even creditors who signed a non-disclosure agreement with the company haven’t obtained material information over the nature of the accounting issues, people familiar with the matter said.

In a Jan 26 meeting in London, they were told to wait for PricewaterhouseCoopers’ forensic analysis, they said.