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Crisis-hit Steinhoff to halt dividends to save cash

As it fights for survival.

South Africa’s Steinhoff will suspend dividend payouts until after the end of June, it said on Friday, as part of efforts to save money and convince creditors to waive some payments due in coming weeks.

The multinational retailer is fighting for survival after it discovered accounting irregularities in December, sparking a sell-off that has wiped more than $10 billion off its market value.

As part of efforts to persuade lenders back its proposals and waive their rights under its existing European financing arrangements, Steinhoff said it would also likely agree not to undertake any acquisitions or mergers, and cancel any undrawn credit facilities.

“While the company is confident that it will receive sufficient support from its finance providers to obtain these limited waivers, there can be no assurance that the company will be able to reach agreement with its finance providers on acceptable terms or at all,” Steinhoff said.

Steinhoff’s top nine banks, with a combined exposure to the retailer of more than 500 million euros, are Commerzbank, Unicredit, Calyon, BNP, JPMorgan, HSBC, Citi, Mizuho and Bank of America.

The company, which has 2 billion euros of its 10.7 billion euro debt maturing this year, said it was still in a position to pay cash interest on its existing debt at a contractual rate, but warned that position remained under constant review.

Steinhoff’s accounting problems stretch back to at least the 2015 financial year. It has asked auditors PwC to get to the bottom of the problems.

Separately, the company, which moved its primary share listing from Johannesburg to Frankfurt two years ago, has been under investigation for suspected accounting fraud in Germany since 2015.

It has previously said that investigation relates to whether revenues were booked properly and whether taxable profits were correctly declared. 

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It is kind of logic that there won’t be a dividend… given the situation. Unless with this statement Steinhoff is telling shareholders there is still enough Profits being made… Cash flow will be bad until they survive or restructure up to 2021 years loans… After which there would be a healthy cash generating number 2 retailer in the world business… with Ikea founder passing away there is hope to become number 1 by 2030…

Of course it had to be. When the reserve capital is depleted, the running expenses exceeds the income earned from operations, and the loan debt surpass the fire sale value of assets, a business is factually insolvent.

They should have started in the second week of December 2017 already to cut as much expenses as possible, including major retrenchments and downward remuneration adjustments as well as to close down loss making units and to sell off other assets. The fast asleep board wavered in their dream of borrowing even more money whilst the waves started to engulf them.
What did they expect would happen?

End of comments.

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