Steinhoff may issue shares to settle legal claims

Steinhoff is considering issuing shares as part of its effort to settle multibillion-rand lawsuits related to an accounting fraud that left it fighting for survival.

Steinhoff uncovered a €6.5bn (about R110bn) hole in its accounts in 2017, causing a share collapse and multiple lawsuits from former business partners and aggrieved shareholders, including former chair Christo Wiese.

The company, which straddles four continents with brands such as Mattress Firm in the US and Conforama in Europe, said it was preparing defences against the claims but is open to early resolution under settlement arrangements approved by creditors in a financial structuring implemented in August.

“These arrangements may include, among other options, an equity issuance by Steinhoff,” the company said in a statement.

It is not clear if Steinhoff, whose share price is down more than 90% since the scandal broke, is considering tapping shareholders for money or issuing new stock.

With a stake of about 20% acquired in 2014, when he sold his company Pepkor to Steinhoff in exchange for shares, Wiese suffered the most from the share price collapse in 2017 when Markus Jooste abruptly resigned as CEO and the company said that it had picked up “accounting irregularities”. Jooste denies any wrongdoing.

Wiese has put in a claim of R59bn, about 14 times more than Steinhoff’s value and about equal to the market capitalisation of Pepkor. He has said that he is open to talks about his claim.

Steinhoff, which is registered in the Netherlands, is also facing a class-action lawsuit from Dutch shareholder group VEB, which is seeking unspecified compensation for damages suffered as a result of misleading information about the company’s financial health.

The company is pursuing its own claims. These include legal proceedings to recoup €300m from an entity that allegedly benefited from dubious transactions and another R858m civil claim against Jooste.

Settling the lawsuits is the next crucial phase in CEO Louis du Preez’s efforts to revive the company after spending months untangling a series of fraudulent transactions, and negotiating with creditors to suspend their claims for repayment and interest until December 2021.

The debt restructuring deal, which was clinched in August, was struck under the company voluntary arrangement, a UK legal process that enables a financially distressed company to ring-fence its historic debt and continue trading.

Steinhoff’s share price was down more than 1% to 97c on Friday, valuing it at about R4bn from more than R200bn two years ago.