Steinhoff International Holdings NV fell to a record low of 44 cents on the JSE on Monday morning, lowering the market capitalisation of the group to lower than R2 billion.
The share has dropped 75% from R1.70 a few days in the past, after an announcement about new efforts to reschedule debt repayments reminded shareholders that Steinhoff is principally bancrupt – and has run out of time.
The announcement acknowledged bluntly that the worth of Steinhoff’s belongings stays decrease than its liabilities and is probably going to stay so on the finish of June 2023, when Steinhoff wants to settle money owed.
Effectively, the plan that underlying companies would carry out nicely sufficient to commerce the holding firm out of its troubles didn’t work out.
Steinhoff issued a number of statements to define a new plan to purchase a little extra time. Unfortunately, the plan will give shareholders a lot lower than they have been hoping for.
The plan …
The new proposal will give collectors an financial curiosity of 80% in Steinhoff and gives shareholders solely a 20% minimize. In addition, the 20% share might be housed in an unlisted entity, which is able to do little to endear it to traders.
In return, collectors will lengthen the maturity dates for debt by three years, to June 2026. In sure circumstances, collectors are providing barely decrease rates of interest too.
It is probably going that collectors will find yourself with 100% if shareholders don’t agree to the proposal and ratify it when resolutions to the impact are put to a basic assembly of shareholders.
“In light of the assessment that the value of the group’s assets continue to be less than its liabilities and will remain so as at 30 June 2023, and subject to further due diligence and structuring, the commercial terms of the maturity extension transaction provide that the individual CPU [contingent payment undertakings] creditors will be entitled to receive equity in Steinhoff International Holdings NV (or any successor entity or another entity replacing SIHNV as ultimate parent of the group),” in accordance to the announcement.
“The maturity extension transaction proposes that the financial creditors will be entitled, individually and independently, to receive 100% of the voting rights and at least 80% of the economic interest in the post-closing equity of the group.”
Good days
It is difficult to imagine that Steinhoff used to be one of many largest corporations on the SA bourse and was included within the JSE Top 40 index – an necessary benchmark index for tracker funds and different portfolios – earlier than the revelation of accounting fraud on the finish of 2017 wiped greater than 90% off its market worth.
Once admired by staff, traders, fund managers and opponents, the then CEO, Markus Jooste, was ostracised.
Calls for court docket motion and the imprisonment of everyone concerned within the accounting scandal have been voiced ever since.
Read:
Unfortunately, even Steinhoff’s present market valuation of R1.92 billion appears optimistic.
High debt
Management warned traders in its notes to the interim outcomes for the six months to March 2022, revealed on 9 June 2022, that the group’s present belongings exceed its present liabilities, and its complete liabilities exceed its complete belongings.
The stability sheet on the date recorded belongings of €14.2 billion, however liabilities of shut to €17.1 billion. The fairness worth was given as a adverse €2.9 billion.
Thus, the present share worth means shareholders are required to pay R1.92 billion for one thing with a e book worth of minus R53 billion – even when administration attracts consideration to the truth that the worth within the monetary statements displays the historic and never their honest worth.
Management additionally mentioned on the time: “The administration board doesn’t intend to liquidate the corporate and the underlying boards nonetheless plan to get well their belongings and settle their money owed within the regular course of enterprise.
“The conclusion of all material litigation, following the successful implementation of the Dutch SoP [suspension of payments] and the S155 Scheme has enabled management to actively pursue the next step of its strategic plan, being the restructure of the group with the view to reducing debt and finance costs.”
Debt
At the top of March, Steinhoff had company debt of roughly €10 billion (round R184 billion), in accordance to the report.
“This debt is break up into a variety of totally different courses, every with barely totally different rights and obligations and every class is held by a variety of totally different traders – predominantly hedge funds or different traders that concentrate on distressed belongings. These traders every have their very own distinctive pursuits.
“Restructuring debt of this quantity and complexity remains an extremely challenging task,” administration mentioned on the time.
The underlying corporations, particularly Pepkor in SA, Pepco in Poland and Mattress Firm within the US, are performing nicely and Pepkor and Pepco have pretty wholesome stability sheets. Steinhoff’s consolidated outcomes for the six months to March 2022 confirmed revenues elevated by 12% to almost €5.2 billion and working revenue by 11.7% to €297 million.
A latest buying and selling replace famous that revenues continued to improve, regardless of a tough buying and selling atmosphere characterised by excessive inflation, subdued shopper spending and persevering with provide chain disruptions.
The drawback is the excessive debt at holding firm degree. Steinhoff had to pay €579 million (round R10.6 billion) in curiosity whereas it earned solely €297 million (R5.4 billion).
No coming again
“Steinhoff has too much debt and time has run out,” says Tebogo Mokone, portfolio supervisor at Afrifocus Securities.
“I cannot see them coming back from this one,” he provides, referring to the bulletins outlining the efforts to lengthen credit score maturity dates. “We will have to wait and see if this is successful.”
He notes that the underlying belongings are performing in addition to will be anticipated within the present financial situations, however are unlikely to improve in worth to an extent that may push the Steinhoff share worth a lot greater.
“It might even go lower,” says Mokone.
Management famous within the interim report that managing each solvency and liquidity dangers stays a main concern and focus space to guarantee the continuing monetary stability of the group.
It appears to be like like shareholders haven’t paid sufficient heed to the numbers and administration’s warnings about Steinhoff’s delicate monetary state of affairs.
At the present worth, the share could be not more than a dangerous choice on an (unlikely) optimistic consequence.
