The Citizen (Gauteng)

Investors may only recover 20%

STEINHOFF CLASS SUIT: BUT TIME IS OF THE ESSENCE

- Ray Mahlaka

Even if thelitigat­ion group’s€12 billion claim issuccessf­ul, lawyerswil­l take a huge cut. Moneyweb

As lawsuits pile up against Steinhoff Internatio­nal, the prospect of ordinary investors recouping losses running into billions of rands from its share collapse looks increasing­ly grim.

A law firm consortium that has launched a class-action lawsuit in the High Court in Johannesbu­rg on behalf of Steinhoff investors joins the ranks of large fund managers, including Coronation, in saying investors have little chance of recouping their losses.

Early estimates by the Internatio­nal Steinhoff Litigation Group indicate that Steinhoff investors – mainly pensioners and savers – could get recompense of up to €12 billion (R199 billion at the time of writing).

This is despite Steinhoff shares losing R205 billion in value since it admitted to accounting fraud on December 6 2017.

“It’s impossible to recover all the money. There are too many liabilitie­s in Steinhoff. If Steinhoff had to pay for these damages, it would be bankrupt. There are also senior debtholder­s who have a claim on damages,” said German law firm’s TILP litigation lawyer Maximilian Weiss.

This is a blow for desperate Steinhoff investors.

TILP has joined forces with Joburg’s LHL Attorneys, Dutch firm Bynkershoe­k Dispute Resolution, DRRT and the UK’s Therium to bring the class-action lawsuit to the high court. The legal heavyweigh­ts who are part of the Internatio­nal Steinhoff Litigation Group represent investors who bought shares between June 26 2013 and December 5 2017.

Weiss is in South Africa this week to woo investors to support the Internatio­nal Steinhoff Litigation Group’s class action.

So far, the lawsuit has garnered support from 100 undisclose­d institutio­nal investors and 1 000 ordinary investors, based mainly in SA.

Even if the litigation group successful­ly achieves a €12 billion claim from Steinhoff, the pool of money available for investors would be reduced by lawyers’ fees.

The high court would determine a reasonable fee due to LHL Attorneys, for example, capped at 25% of the class-action claim.

Steinhoff is battling to stay afloat, as it had to defer payments of over €9 billion (R145 billion) to creditors and interest payments of over €1 billion (R17 billion) per year to the debt.

Rescue proceeding­s for distressed companies usually prioritise damages claims for senior creditors, while ordinary investors are left until last.

DRRT’s Alexander Reus said investors might be able to recoup as much as 20% of their money initially invested in Steinhoff.

Casting the net beyond suing previous and current Steinhoff directors will ensure the settlement to investors is supplement­ed by other players, said Zain Lundell at LHL Attorneys.

More than 30 current and former directors of Steinhoff and its subsidiari­es have been cited, including former CEO Markus Jooste, former chief financial officer Ben la Grange and current CEO Danie van der Merwe.

The applicatio­n also names as defendants three banks and the auditors that assisted Steinhoff with its 2015 Frankfurt listing.

“We want to resolve this claim quickly while Steinhoff has assets. If nothing is done in the next year, it might be difficult to recover money for investors,” said Reus.

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