Banks, creditors to meet Steinhoff

Johannesburg - US and European banks, some of whom are meeting with Steinhoff International on Monday, are among creditors with billions in exposure to the global retailer whose asset value has plummeted amid an accounting scandal.

Total exposure to lenders and other creditors was almost €18bn ($21bn) as of the end of March. Long-term liabilities were €12.1bn and short-term liabilities €5.87bn, its first-half earnings statement shows.

Those are the most recent Steinhoff results available after it indefinitely postponed publishing full-year financials on Wednesday.

“The great unknown is the funding of the off-balance-sheet structures, which could spill over into fresh bank liability,” Adrian Saville, chief executive officer of Cannon Asset Managers in Johannesburg, said on Friday. The short-term debt could “fall over if the business fails”, he said.

Steinhoff, listed in Frankfurt and Johannesburg, has lost more than 80% of its market value in the three days since the company started a probe into accounting irregularities and Chief Executive Officer Markus Jooste resigned.

In South Africa, Steinhoff has relationships with Standard Bank, Investec and a unit of FirstRand. Globally some of the lenders include Citigroup, Bank of America, HSBC Holdings and BNP Paribas.

Steinhoff has scheduled a meeting on December 11 with lenders from two of its syndicated facilities, according to three sources familiar with the matter

The meeting is with banks involved in a €2.9bn revolving credit facility and a $4bn syndicated financing facility for the acquisition of US brand Mattress Firm, the sources said.

Steinhoff representatives didn’t respond to requests for comment on the meeting or the amount of debt.

Wiese's relationships

Banks also have exposure to Steinhoff through loans provided to chair Christo Wiese’s investment vehicles.

Last year, the billionaire and largest shareholder of the company pledged 628 million of Steinhoff’s shares in collateral to borrow money from Citigroup, HSBC, Goldman Sachs and Nomura Holdings. 

That was to participate in a share sale in conjunction with the acquisition of Mattress Firm and Poundland, according to a company statement. It’s unclear whether Wiese has repaid part of those loans since. The value of all shares pledged as collateral is now €365m, down from €2.2bn a month ago.

Citigroup, Goldman and Nomura declined to comment on the Wiese loans, and HSBC didn’t immediately respond to a request for comment.

Investec didn’t respond to a request for comment on the debt. Standard Bank, Citigroup, BNP, Bank of America and HSBC declined to comment.

FirstRand unit Rand Merchant Bank “has banking relationships with Steinhoff and with entities owned by” Wiese, the Johannesburg-based lender said in an emailed response to questions.

“We have reviewed our credit exposures to these entities and believe they are adequately secured,” it said, declining to give further details because of client confidentiality.

“Banks usually will also go for three times interest cover, so as long as the underlying cash flows remain stable they can withstand a sharp pullback,” said Patrice Rassou, the head of equities at Sanlam Investment Management in Cape Town.

“As long as the banks have the underlying business as security, with the cash flows, and not the share as security, then the risk is reduced.”