Steinhoff gets support

RECOVERY: RETAILER STRIVING TO GET OVER STRING OF RECENT SETBACKS

There is a little light at the end of the tunnel as plans are afoot to save company.

Steinhoff International will meet immediate interest payments and said it has won the support of South African lenders as the global retailer makes early progress in its battle to survive an accounting scandal.

The owner of Mattress Firm in the US and Conforama in France is seeking about €200 million (about R3 billion) to help maintain liquidity at its European businesses.

A first instalment of €60 million will be delivered by the end of the week. A planned refinancing of all SA debt will allow Steinhoff to free up funds for the rest of the company, the retailer said.

“This is a relatively small step, but it does imply there is some money to go around – not a lot, but some,” said Charles Allen at Bloomberg Intelligence. “That they are asking for a relatively small amount of money may imply they can keep the company going. What terms lenders want is important.”

Going concern

The financing update underlines the Frankfurt- and Johannesburg-listed company’s determination to survive as a going concern even after it reported accounting irregularities that knocked 90% off the market value.

Other retail chains owned by Steinhoff include Pep, Africa’s largest clothing chain, and Poundland in the UK.

The scandal led to the resignations of CEO Markus Jooste and Chairman Christo Wiese, who is also the biggest shareholder. Both have since made steps to shore up their personal finances, with Jooste selling a champion race horse and putting a R15-million luxury property on the market.

Steinhoff is being probed by SA regulators and has been called to a hearing with lawmakers to discuss its near collapse at the end of the month.

“While a step in the right direction, we remain cautious,” Jeffrey Cope at Stifel Nicolaus wrote in a note to clients. “An additional €60 million in funding will not solve Steinhoff’s problems. We also still have no insight into the magnitude of the accounting issues or when audited results will be released.”

Steinhoff said it would give a trading update for the three months through December in the last week of February, its first report on the performance of the business since it failed to publish audited earnings last month.

The company has appointed PwC to investigate the accounting issues and will update on progress “as soon as it is able to do so,” Steinhoff said. The auditor’s probe has unlimited scope and PwC will have full access to the company.

The retailer’s next meeting with European-based creditors is scheduled for January 26 in London. The company is also planning to request waivers on the terms governing some of its existing financing.

“As far as one can tell, all the issues are in the European business and so the meeting on January 26 with European lenders is notable,” Allen said. “The trading update will also be important.” – Bloomberg

Jeffrey Cope Stifel Nicolaus