There will be high expectations of Steinhoff’s restructuring plan, which is expected ‘within weeks’.
Heather Sonn, chair of Steinhoff, wasn’t exactly gushing with optimism after the company’s meeting with more than 50 financiers at a hotel in Kensington, London, last Friday.
Unlike thousands of others who celebrated after flocking to Heathrow to gawk at the royal wedding, Sonn’s team experienced a less than jubilant few days in the British capital. But then, the tourists didn’t owe €9.6bn in debt that they’re battling to service.
“Look, it’s a tough time. There are different clusters of lenders with different requirements and different concerns. Proposals were made and there were some discussions, so now we have to see what we can come up with,” Sonn says.
Steinhoff’s brains trust will now meet, and probably come up with the final restructuring framework in the next two weeks that it hopes will appease everyone.
But from the warts-and-all presentation given to its funders — of which more than half are hedge funds — it’s clear that deciding which assets to sell to stay afloat is no easy task.
That presentation of 40 slides told a sombre story. Steinhoff warned the “liquidity position” of the wider group companies is “not sustainable beyond the next few months” — unless a restructuring is agreed.
The company also flagged which companies are most likely to be sold to give Steinhoff close to fair value — money it can then use to repay its debt.
Its best assets include its 71% of the Jse-listed Star, which owns brands in Africa like Pep, Ackermans and Incredible Connection and is valued at €4.2bn, and its 26% of industrials company KAP, worth €500m.
But selling the SA assets is unlikely to help, as the Reserve Bank might look askance at transferring that cash overseas to settle debts in Europe.
Overeas, its best asset is Pepkor Europe, which has 1,213 stores on the continent, particularly in Poland. Steinhoff’s internal assessment says it is “marketable”, and you would get “fair value” should you sell it today.
Poundland, another discount retailer, with 883 stores in the UK, is almost as solid an asset and likely to be equally tradable.
Then there are the dogs: Kika Leiner, which is a household goods retailer with 48 stores in Austria and Eastern Europe; UK retailers Harveys and Bensons for Beds, which have 125 stores between them; and French chain Conforama.
But there was no more obvious an albatross than the Us-based Mattress Firm, for which former CEO Markus Jooste paid a whopping Us$3.8bn in August 2016 — a 115% premium to its share price at the time. Back then, Jooste bragged how Mattress Firm was “an industry-leading partner” with a “national supply chain”.
Steinhoff’s internal assessment found that not only does Mattress Firm need more money to keep going, it’s also not marketable, and you wouldn’t get fair value. Rather bravely, Steinhoff has billed this as a “turnaround opportunity”.
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