South African Steinhoff Unit Mulls Early Redemption of Bonds

JOHANNESBURG (Capital Markets in Africa) – Steinhoff International Holdings NV said one of its South African units is considering an early redemption of all notes in issue as the global retailer struggles to stay afloat amid an accounting scandal.

Steinhoff Services Ltd.’s redemption of securities issued under a 15 billion-rand ($1.2 billion) bond program will require pricing supplements to be amended and restated, the Frankfurt- and Johannesburg-listed company said in a statement after the market closed on Thursday. The necessary approvals will have to be obtained, Steinhoff said, without giving more detail.

The parent company’s woes began on Dec. 5 when it said it had uncovered accounting irregularities and that Chief Executive Officer Markus Joostewas resigning. Thereafter its bond yields spiked and its share price lost most of its value. Banks started to withdraw lines of credit and regulators from South Africa to Europe began to investigate. The stock fell 3.7 percent to 6.50 rand as of 9:36 a.m. in Johannesburg, extending its decline this week to 26 percent.

To raise liquidity the retailer has started parting with some assets it built up in a two-decade acquisition drive. French retailer Carrefour on Thursday said it acquired a 17 percent stake in Showroomprive from Steinhoff’s Conforama for 79 million euros ($95 million), while last week Steinhoff’s Austrian unit, Leiner Immobilien, sold its flagship store in Vienna for 60 million euros. Other measures to shore up finances include Steinhoffselling its Gulfstream 550 jet, while Jooste has been auctioning his racehorses.

With Steinhoff also having issued debt internationally, the European Central Bank said earlier this week it had disposed of the company’s securities after they were downgraded to junk.

Pending Lawsuits
Steinhoff Services, the vehicle the retailer uses to sell listed bonds on the Johannesburg Stock Exchange, has 12 notes in issue, according to data compiled by Bloomberg. Those securities amount to a total of 7.6 billion rand in debt. More than half of those sales took place last year with Steinhoff Services having sold 4.83 billion rand of bonds in 2017. It has three notes valued at a total of 1.4 billion rand maturing in 2018.

A group of South Africa-registered Steinhoff shareholders have asked to participate in a class-action lawsuit being brought against the company by the Dutch Investors Association, Johannesburg-based Business Day newspaper reported on Friday, citing Armand Kersten, head of European relations at the Dutch group.

The lawsuit is one of at least three filed by investors angry over their losses, including one in Frankfurt in December. Innsworth Litigation Funding, a London-based unit of Paul Singer’s Elliott Management Corp., has begun building a case against Steinhoff and is seeking shareholder clients willing to sue, it said last month. Deminor Recovery Services, a Brussels-based shareholder advisory group, has also invited institutional shareholders to register for a potential case.

Source: Bloomberg Business News