END LOOMS FOR STEINHOFF AS CASE AGAINST JOOSTE BUILDS
It’ll take a miracle to keep Steinhoff alive but what will happen to Jooste?
Steinhoff, which defied expectations by surviving for five years after revelations of a R106bn fraud, will soon come face to face with its own mortality. This week votes were tallied over a contested “restructuring plan” that will see its assets put into a new company and slowly sold, culminating in its liquidation: 100% of its creditors (including hedge funds), voted in favour; 89.6% of shareholders voted against.
Sadly, the shareholder veto means zip, because the hedge funds hold all the cards right now. So the company will probably approach a Dutch court to implement the plan anyway.
“Steinhoff’s board will now consider the voting results, and decide whether to approach the Dutch court with the restructuring plan,” says spokesperson Tyrrel Murray. “The court will decide whether to order that the restructuring go ahead or not.”
If Steinhoff’s demise seems inevitable, this won’t happen if a German nonprofit called Schutzgemeinschaft der Kapitalanleger (SdK) gets its way. SdK, whose mission is to “protect minority shareholders”, says it will fight any court bid to implement the “restructuring”.
SdK’s Marc Liebscher tells the FM: “We expected shareholders to vote against it, just as we expected the creditors to vote for it. But we’re not going to let Steinhoff go ahead with this plan without a fight, as we believe there’s still value for shareholders.”
It’s a tough argument to make, because Steinhoff’s last accounts show it had €10.4bn in debt and assets of €7bn — making it insolvent to the tune of €3.4bn. But SdK has done its own valuation which, it says, shows Steinhoff shareholders are “in the money”.
Says Liebscher: “We believe Steinhoff is wrong. So this week we’re asking the Dutch courts to appoint an independent restructuring expert, who can tell us what value there is. It would only be fair for the courts to have an objective opinion before they decide whether to approve the restructuring.”
The hedge funds, which are entitled to take over Steinhoff’s assets when it (inevitably) defaults on debt repayments this month, aren’t renowned for their generosity. As it is, they’ve begrudgingly postponed taking over the assets for three years, while giving shareholders 20% of the new entity that will hold Steinhoff’s assets, so they can share any potential upside from asset sales.
An almighty scrap looms. But perhaps more interestingly, when will the man who caused this trouble have to account?
Markus Jooste was due in a German court on April 17 to face criminal charges, but failed to pitch. Isabelle Möllers, spokesperson for that Oldenburg court, tells the FM “the court is still considering the application for an arrest warrant”.
Despite his absence, the case is building. Last week, the noose tightened when Dirk Schreiber, Jooste’s co-accused in Germany, admitted guilt when it comes to concocting “sham transactions” that duped shareholders. It’s a big deal because Schreiber, at one point, headed Steinhoff’s European business ground zero for billions in fictitious profits.
At the last court hearing on May 13, Schreiber “admitted that he was aware that the alleged transactions were sham transactions, and that he should not have accounted for them”, says Möllers.
Next week, on June 7, Schreiber and his other co-accused, Siegmar Schmidt, will go back to court, where he’ll make “a more detailed statement”.
It’s another blow to Jooste, weeks after George Alan Evans, the 72-year-old banker who set up several secretive trusts for him, pleaded guilty to the German charges and paid a €30,000 fine.
For prosecutors it’s a breakthrough, since Schreiber is essential to understanding leaked e-mails between him, Jooste and Schmidt in August 2014 a critical week in which Steinhoff was preparing its accounts for the year to June 2014.
In the first e-mail on August 17, Schreiber sends Steinhoff Europe’s accounts to Jooste, which he describes as a “proposal”.
On August 21, Jooste writes back to Schreiber (and copies Schmidt), saying: “I have now reviewed all the figures of the group and need some additional entries to balance the final consolidation please.”
He says Steinhoff has to write off R3.6bn from its subsidiary JD Group, and says: “You can understand that puts my consolidated results out of balance.”
Jooste then instructs Schreiber to redo the numbers, using money laundered through Genesis a company run by Schmidt, which was supposed to be independent of Steinhoff.
He says: “Can we please accrue/pay an additional fee/income of €100m from the Genesis group to Steinhoff to reduce cost of sales which will take gross profit to 40% which is in line with our plans/forecasts.” Effectively, he is telling Schmidt to sluice €100m from his “independent” company to Steinhoff, to reduce its cost of sales.
Jooste says his goal is to “create the right values” in the accounts to “clean” them for the following year, when Steinhoff would list in Frankfurt. “We need to show the right group figure, without currency, now to lay the table for next year,” he says.
Schmidt then warns him that Schreiber has been “fighting” with Steinhoff’s German auditor, Commerzial Treuhand (CT), to “get everything through the books”, and warns that CT won’t accept “additional entries without any proper documentation”. Jooste overrules them, insisting money be put into Steinhoff. This infuriates Schreiber, who sends an amusing e-mail in German directly to Schmidt, complaining that Jooste “does not have things in hand that’s the reality. To overstate the result in the current market, as in the past, brings nothing!”
It’s damning stuff, and precisely why Schreiber’s admission of guilt is so dangerous for Jooste. You can see why he would be in no hurry to find his passport.