Sharing out the Steinhoff crumbs
LAWSUITS: SETTLEMENT DESERVES TO SUCCEED
Team Tekkie Town first to indicate it won’t accept offer.
No doubt the Steinhoff board spent much of the last 12 or so months getting a feel for exactly how much the company could afford to settle the 90 multi-jurisdictional lawsuits it was facing – and balancing that figure against what it believed the claimants would accept.
In addition, it had to factor in the chances of getting the necessary backing from the group’s creditors, who have agreed to freeze their €9 billion (about R180 billion) in claims until end of 2021. The complex deal Steinhoff chief executive Louis du Preez announced last week might just do the trick.
For the intricate corporate artistry of it alone, it deserves to succeed. But sadly for Du Preez, success is far from certain.
Emotions, principles
Not only is it the strength and size of the individual claims that had to be considered, the board also had to give thought to how the claimants would react to the relative allocations as well as the individual claimants’ propensity to carry on with litigation.
Fortunately for Du Preez, the proposed settlement does not need 100% acceptance; it can be implemented if some claimants baulk.
“We would obviously prefer consent, and that is one of the reasons why we have released the details as we did,” said a spokesperson for Steinhoff.
The level of rejection that can be tolerated depends on the relevant implementation process, which means what category of claimant (shareholder or vendor) and in what country (South Africa or
Netherlands).
The process applicable to Dutch-registered Steinhoff International NV is called a “suspension of payments” procedure.
“The level of claimant support required is 50% of all claimants [including financial creditors] present and voting, representing at least 50% of the total claims against SIHNV,” explained the spokesperson.
In South Africa, the settlement proposal involves a Section 155 process.
“The level of claimant support required is a majority in number, representing at least 75% by value, of claimants present and voting in each class of creditors.”
In a remarkably ambitious proposal like this, the comparative allocation is as important as the absolute.
If all the claimants accept that €850 million (about R1.7 billion) is the maximum Steinhoff can afford to pay out (in cash and Pepkor shares), then half the battle will be won. But if they believe the individual allocations are unfair, they will baulk.
One rejection so far
At this early stage, the only party that has indicated that it is unhappy with the proposed settlement is the Tekkie Town team, which is suing for the return of the company it sold to Steinhoff in 2016.
Former Tekkie Town CEO Bernard Mostert has confirmed that it will not be accepting the offer.
In a display of what is probably Du Preez’s worst nightmare, Mostert recent told Daily Maverick: “We are not financially driven and are happy to see the court process out.”
Team Tekkie Town is being offered R116 million, which is way short of its claim of around R2 billion. Not only is it not being offered Tekkie Town shares back, but the R116 million will be a mix of cash and Pepkor shares.
If the Tekkie Town team is the only significant opponent to the settlement, then Du Preez will have scope to come to some sort of arrangement. Inevitably that scope will be limited if there are other significant opponents.