Well at least we can now begin to see the size of the nuclear bomb that has been detonated inside of Steinhoff.
The company released a statement this morning putting a figure on the “investigation, validity and recoverability of certain non-South African assets of the company which amount to circa €6 billion”.
At current exchange rates, that’s R96 billion.
The company said nothing else in this regard.
But it did immediately move to address liquidity (the ability to pay suppliers and creditors on an ongoing basis). As could be seen by the market reaction to the price of listed subsidiaries and investments owned by Steinhoff, namely its stakes in Steinhoff Africa Retail (Star), KAP Holdings and PSG, it appears the stakes in the latter two will be sold to raise money and pay down debt. “The company has today received expressions of interest in certain non-core assets that will release a minimum of €1bn of liquidity,” the statement reads.
Then, Star is going to formally commit to refinancing its obligations owed to Steinhoff. Star will raise long-term funding in South Africa, getting a lower cost of finance than what it currently gets from Steinhoff, and repay Steinhoff in full. Star, which includes Pepkor, is highly cash generative.
Steinhoff hopes to raise €2 billion from the combined sale of investments and restructuring of the debt owed by Star.