Steinhoff, having survived five years beyond its sell-by date, will soon come face to face with its own mortality.
This week votes were tallied over a controversial “restructuring plan” that will see its assets put into a new company and slowly sold, ultimately culminating in Steinhoff’s liquidation. Hundred percent of its creditors, including hedge funds which are owed €10.4bn, voted in favour; 89.6% of shareholders voted against.
Sadly, the shareholder veto means nothing, because the hedge funds hold all the cards at this point. So the company will probably ignore the shareholders and approach a Dutch court to implement the restructuring.
“Steinhoff’s board will now consider these voting results, and decide whether to approach the Dutch court with the restructuring plan,” says company spokesperson Tyrrel Murray. “From there, the court will decide whether to order that the restructuring go ahead or not.”
If Steinhoff’s demise seems inevitable, this won’t happen if a German nonprofit called Schutzgemeinschaft der Kapitalanleger (SdK) gets its way. SdK, whose mission is to “protect minority shareholders”, says it will fight any court bid to implement the “restructuring”.
SdK’s Marc Liebscher tells the FM: “We expected shareholders to vote against it, just as we expected the creditors to vote for it. But we’re not going to let Steinhoff go ahead with this plan without a fight, because we believe there’s still value for shareholders.”
It’s a tough argument to make, because Steinhoff’s last accounts show it had €10.4bn in debt and assets of €7bn — making it insolvent to the tune of €3.4bn. But SdK has done its own valuation which, it says, shows Steinhoff’s shareholders are actually “in the money”.
Says Liebscher: “We believe Steinhoff is wrong. So this week we’re asking the Dutch courts to appoint an independent restructuring expert, who can tell us what value there is. It would only be fair for the courts to have an objective opinion before they decide whether to approve the restructuring.”
The hedge funds, which are entitled to take over Steinhoff’s assets when it (inevitably) defaults on debt repayments this month, aren’t renowned for their generosity. As it is, they’ve begrudgingly postponed taking over the assets for three years, while giving shareholders 20% of the new entity that will hold Steinhoff’s assets, so they can share any potential upside from asset sales.
So, an almighty scrap looms. But perhaps the more interesting question is: when will the man who caused all this trouble be called to account?
Markus Jooste was due in a German court on April 17 to face criminal charges, but failed to pitch. Isabelle Möllers, spokesperson for that Oldenburg court, tells the FM “the court is still considering the application for an arrest warrant”.
Effectively, he is telling Schmidt to sluice €100m from his ‘independent’ company to Steinhoff, which it can treat as a rebate to reduce its cost of sales
Despite his absence, the case is building. Last week, the noose tightened when Dirk Schreiber, Jooste’s co-accused in Germany, admitted guilt when it comes to concocting “sham transactions” that duped shareholders.
It’s a big deal because Schreiber, at one point, headed Steinhoff’s European business — ground zero for billions in fictitious profits.
At the last court hearing on May 13, Schreiber “admitted that he was aware that the alleged transactions were sham transactions, and that he should not have accounted for them”, says Möllers.
Next week, on June 7, Schreiber and his other co-accused, Siegmar Schmidt, will go back to court, where he’ll make “a more detailed statement”.
It’s another blow to Jooste, weeks after George Alan Evans, the 72-year-old banker who set up several secretive trusts for him, pleaded guilty to the German charges and paid a €30,000 fine.
For prosecutors it’s a breakthrough, because Schreiber is essential to understanding leaked e-mails between him, Jooste and Schmidt in August 2014 — a critical week in which Steinhoff was preparing its accounts for the year to June 2014.
In the first e-mail, on August 17, Schreiber writes to Jooste attaching Steinhoff Europe’s accounts, which he tellingly describes as a “proposal”.
On August 21, Jooste writes back to Schreiber (and copies Schmidt), saying: “I have now reviewed all the figures of the group and need some additional entries to balance the final consolidation please.”
He says Steinhoff has to write off R3.6bn from its subsidiary JD Group, and says: “You can understand that puts my consolidated results out of balance.”
Jooste then instructs Schreiber how to redo the numbers, using money laundered through Genesis — a company run by Schmidt, which was supposed to be independent of Steinhoff, but which clearly wasn’t.
He says: “Can we please accrue/pay an additional fee/income of €100m from the Genesis group to Steinhoff to reduce cost of sales which will take gross profit to 40% which is in line with our plans/forecasts, and pay an additional €30m on all debit loans to reduce net finance costs to just below the previous year.”
Effectively, he is telling Schmidt to sluice €100m from his “independent” company to Steinhoff, which it can treat as a rebate to reduce its cost of sales.
Jooste says his goal is to “create the right values” in the accounts to “clean” them for the following year, when Steinhoff would list in Frankfurt. “We need to show the right group figure, without currency, now to lay the table for next year,” he says.
In another e-mail, Schmidt warns that Schreiber has been “fighting” with Steinhoff’s German auditor, Commerzial Treuhand (CT), to “get everything through the books”, and warns that “your additional entries without any proper documentation will not be accepted by CT”.
But Jooste overrules this, insisting money be found to shunt into Steinhoff.
This infuriates Schreiber, who sends an amusing e-mail in German directly to Schmidt, complaining about Jooste’s inability to see sense. Says Schreiber: “We do not have any money, so we have to give loans ourselves”, adding that “he does not have things in hand — that’s the reality. To overstate the result in the current market, as in the past, brings nothing!”
It’s damning stuff, and this is precisely why Schreiber’s admission of guilt is so dangerous for Jooste. You can see why he would be in no hurry to find his passport.
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