Steinhoff share price plummets

Retail holding company Steinhoff’s share price tumbled as much 25% on Wednesday on news that the company will ask creditors to approve a restructuring plan that leaves shareholders with nothing.

The shares fell to as low as 20c from a previous close of 27c, but had pared the losses to 23c in afternoon trading.

The company’s debt, which includes €10.2bn due at the end of June, exceeds the value of its assets by €3.5bn, essentially rendering it bankrupt.

Steinhoff announced late on Tuesday it had a drawn up new restructuring plan in a last-ditch attempt to avoid creditors taking over in June. The plan is similar to one announced in December, except shareholders will walk away with nothing.

The group said had finalised a plan with lenders in December that gave creditors, mostly hedge funds, 80% of the firm in exchange for extending their debt repayment date to June 2026. Shareholders would have got 20% of an unlisted company with no guarantee that the holding would have any value.

At Steinhoff’s AGM last week just over than 60% of shareholders voted against that plan.

Now, the Steinhoff board has voted to enter a restructuring process under Dutch law, Wet Homologatie Onderhands Akkoord (WHOA) that, if successful, would also see debt repayment dates extended for three years, with two optional year-long extensions.

If the new plan is agreed to by lenders and the Dutch courts, shareholders will have no financial interest in the company, losing their entire investment.

Steinhoff said on Wednesday it had considered other ways to save the company, including an equity injection, a refinancing, and a debt restructuring that could have included a debt-forequity swap.

“These alternatives did not prove to be viable, mainly due to the deteriorating macroeconomic circumstances and reduced access to capital, the significant balance sheet pressure the group was under and the impending debt maturity date,” it said.

The board considered bankruptcy proceedings as a result of the imminent debt default in June. But this would not prevent creditors from exercising their rights over assets especially foreign assets outside Dutch jurisdiction such as Pepkor. Bankruptcy would not protect shareholders either, Steinhoff said.

German shareholder activist group The Schutzgemeinschaft der Kapitalanleger said at the AGM last week it would to go to court to object to the WHOA restructuring process.

Its representative, lawyer Marc Liebscher, said: “Are you aware that our war chest for lawyers is filled to the brim? I represent around 1,800 shareholders ... we will prevent this robbery from happening.”

Sasfin analyst David Shapiro said he does not understand why shareholders voted against the deal to give them a 20% stake in an unlisted vehicle and instead opted for nothing.

“The lenders were saying that the company is bankrupt and the liabilities exceed the assets and therefore they were not going to be paid back in full,” he said. “This means naturally there would be zip [nothing] for the equity holders. However, they said they would compromise and convert their debt to equity and leave some crumbs for the equity holders. This would have been better than nothing.

“Instead, that was rejected for a new plan that will only extend the agony, or extend the belief that the company will pull out of a nosedive and head towards the heavens. Does no-one understand how deeply in trouble the company is?” Shapiro said.