Investors may only recover 20%
STEINHOFF CLASS SUIT: BUT TIME IS OF THE ESSENCE
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.