Yet another blow to Steinhoff’s salvage bid
Court move by company linked to ex-business partner delays deal with furniture retailer's creditors
Embattled furniture retailer Steinhoff is facing a new challenge to its attempts to strengthen its balance sheet, with former business partner Andreas Seifert opposing an agreement reached with creditors in December.
The deal, referred to as a company voluntary arrangement (CVA), had been reached with and approved by an overwhelming majority of creditors in December and two Steinhoff subsidiaries, Steinhoff Europe AG (SEAG) and Steinhoff Finance Holding Gmbh (SFHG).
The implementation of the CVAs agreed with creditors of SEAG and SFHG will now be delayed until the application brought by LSW Gmbh, a German entity associated with Seifert, have been resolved, Steinhoff said on Friday. CVAs allow financially distressed businesses to come to an agreement under UK law with creditors, often by negotiating more favourable lease agreements and allowing some outlets to close before lease contracts expire.
Markus Jooste, Steinhoff’s former CEO, told MPs in September 2018 that the group’s near-collapse originated from a protracted dispute with Seifert. The legal battle, mainly over the valuation and ownership of German furniture chain POCO, led to investigations by European regulators and tax authorities that attracted the attention of Steinhoff’s auditors at Deloitte. Jooste resigned in December 2017 after Steinhoff’s board disagreed with his plan to replace the auditors and publish unaudited financial results.
His resignation, along with an acknowledgment of accounting irregularities, triggered a collapse in Steinhoff’s share price, wiping more than R200bn off the company’s market value in what has become SA’s biggest corporate scandal.
On Friday, Steinhoff told Business Day the CVAs still stand, together with the moratorium on creditor action. “We and our advisers need to review the substance to the challenge and assess the next steps and likely timing implications. We will press to have the matter resolved as soon as possible,” it said.
Attempts to reach LSW for comment were unsuccessful.
Seifert is also still embroiled in litigation with Steinhoff on other matters. He is suing two Steinhoff subsidiaries, AIH Investment Holding AG and SEAG, for €249m plus interest and costs. This is in respect of an outstanding portion of a €300m loan advanced by Seifert in 2011.
Steinhoff is opposing this claim, and the dispute is ongoing in the Austrian courts.
Steinhoff’s SEAG and SFHG acted as treasuries to the wider group, raising debt from external lenders and placing surplus cash from group companies to fund ongoing borrowing requirements.
The two companies collectively hold most of the debt borrowed by the group, which is well above €10bn, according to the most recent filings. Steinhoff’s market capitalisation was €467.6m at the market close on Friday.
It was these subsidiaries that became insolvent following developments in December 2017, which prompted the company to seek relief from creditors through an orderly restructuring process.