Steinhoff this week will this week issue a circular to shareholders, who now need now to vote on whether they’ll accept just 20% in a new company, or give away their rights entirely to the bankers and funders who essentially hold the cards, — not to mention the retailer’s overwhelming €10.23bn borrowings. The FM spoke to CEO Louis du Preez.
What is Steinhoff likely to look like in a year’s time if the creditor deal does get approved?
Ultimately, as we said in the financial statements, there will be a new holding company — the new Steinhoff, if you like — but still a company that will hold investments in underlying businesses that are predominantly retailers. The four main entities will be Pepco, Pepkor SA, a big interest in Mattress Firm and Greenlit, which is the Australian business. What we are proposing to our current shareholders is that they retain a 20% economic stake.
But in an unlisted company?
Correct; that’s where we think it will end up. But that’s subject to the shareholders, who have the right to vote on this on March 16. We suggest they vote in favour of it. It’s been a negotiation of many months with the creditors, and at the end of the day there’s a huge amount of historical debt that becomes due on June 30. And that debt has been in the market since 2017, so that’s something people lose sight of at times. This is not new debt.
What has turned against us in the past 12 months is the macro events of 2022. It’s been a horrific year for equity, and especially for capital markets, so we couldn’t realise some of the asset plans we had. Therefore we couldn’t pay down debt. Then the capital markets just closed, and now you have the timing issue of the debt coming up for payment. We believe this deal is the best we could have done for our current shareholders.
It still came as quite a shock to many retail investors when you announced it in December.
Again, this is unfortunately the reality of a company with a massive amount of debt on its balance sheet that has always been there.
So you’re saying shareholders shouldn’t have been wrong-footed by this?
I think people must keep in mind that the revelations of December 2017 triggered all the debt to become due immediately. What we managed to do at that stage was to negotiate an extension to December 2021. And then [we had] the litigation settlement, which was implemented in the first quarter of last year. As part of that we managed to convince the financial creditors — call it our banks — to extend the debt another 18 months to June 2023. All those facts have always been in the public domain. And there comes a time when the bank says: “I want my money.”
What happens if shareholders don’t vote in favour?
We’ve got two options: we either go through a Dutch restructuring process or the creditors can enforce their security and take away all the assets. That’s the risk.
How about you — will you stay on?
That’s what my wife asks me as well. It’s going to need someone to be at the helm, if the structure gets implemented as we think it should. On a personal level there is a role to see this through. But that’s a discussion I’ll have with the new owners.
Has any of this actually been enjoyable for you?
It’s been tough, and tough on my family, but it’s been an unbelievably interesting ride. The one thing about Steinhoff is that you never know what’s going to happen tomorrow. And hopefully, in a small way, we’ve managed to make a positive contribution for people. That we are still here after five years is a great achievement — and if this group can survive for 10 years after the 2017 calamity I think it will be unheard of. If you add it up, about €6.5bn has left this group since December 2017, which includes debt that has been repaid and €1.6bn that has been disbursed to shareholders for damages claimed.
And what people forget is that in the early days, in 2018, we repaid about €2bn of debt in South Africa. All the South African banks were repaid in full. The settlement was probably the sixth- or seventh-largest shareholder settlement in the history of the world, outside North America. Also: all the Steinhoff businesses are now financially independent; they stand on their own legs, they don’t rely on central funding. So that is a huge achievement. And people say I get melodramatic when I say this, but it has made sure that the jobs at that level were looked after.
Lastly, do you think Markus Jooste will pitch for his German trial?
I’ve got no idea; you should ask [his lawyer], Callie Albertyn.
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