Desperation stakes as Steinhoff hocks the family silver
Steinhoff International Holdings’ quest for cash has yielded about R13-billion from asset sales as the embattled retailer struggles to stay afloat. The question is whether the relatively small steps it’s taken can forestall more radical ones.
Since revelations last month of accounting irregularities, Steinhoff sold the company jet, shed stakeholdings and sought to refinance debtto free up funds. It even ended its sponsorship of the rugby team at Stellenbosch University, the alma mater of former CEO Markus Jooste.
“Scrambling around to find relatively small amounts of money points to the extent of the problems,” said Charles Allen, a London-based analyst at Bloomberg Intelligence.
In its largest move so far, the company on Monday sold R7.1-billion of stock in South African financial-services firm PSG Group. Yet Steinhoff, which snapped up French furniture retailer Conforama, British discount chain Poundland and Mattress Firm of the US in the past decade, may have little choice but to begin unwinding that buying spree, said Syd Vianello, an independent retail analyst in Johannesburg.
Scrambling around to find relatively small amounts of money points to the extent of the problems.Charles Allen, a London-based analyst at Bloomberg Intelligence
“Selling smaller assets that are not essential to its operations is part of its strategy,” said Vianello. “But I don’t think it will stop there. Banks will want their money and want it quickly, so there will be big sales forced on them.”
Steinhoff shares have fallen 84% since December 5, the day it announced the discovery of the accounting problems and the departure of Jooste as CEO.
Seven weeks on, investors are still in the dark about the scope of the irregularities. Since hiring auditor PwC to investigate, Steinhoff has said it may have to restate earnings going back to at least 2015. Questions over the accounts and the company’s sprawling operations are complicating efforts to estimate its cash needs.
The retailer has already parted with some of the assets it accumulated. French unit Conforama sold a 17% stake in Showroomprive for about half what it paid for the stake in May last year.
Steinhoff offloaded its Gulfstream 550 jet, purchased last April, for an undisclosed price. The plane was advertised for $24.8-million in 2016 in a sales brochure that showed the luxurious interior fitted out in cream-coloured leather seating, wood panelling and a marble-and-brass bathroom.
The company’s former bosses are also scrambling for cash. Billionaire Christo Wiese, who resigned as chairman on December 15 but remains Steinhoff’s largest investor, sold shares in Shoprite for about R4.2-billion. Jooste has been auctioning off racehorses and put a plot on a luxury estate up for sale for 15 million rand.
Its lenders, however, are keeping it on a tight leash. A meeting with banks in London on December 19 led to little progress because Steinhoff couldn’t clarify the extent of the accounting issues. The next meeting with European-based creditors is scheduled for Friday in London. The company is also planning to request waivers on the terms governing some its existing financing.
Four of the biggest US banks were already stung, to the tune of more than $1-billion in total, mostly after writing down margin loans made to Wiese and backed by Steinhoff’s shares.
In addition to pulling support for the rugby, cricket and hockey teams at the university in Stellenbosch, Steinhoff curtailed sponsorship of South Africa’sworld champion seven-a-side rugby team. It’s maintaining two corporate social investment programs, an underprivileged schools project and a program that supports about 400 Aids orphans in Soweto. — Bloomberg