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Steinhoff increases its settlement offer

From ‘less than nothing to a bit more than nothing’, as one shareholder puts it.
The payout to ‘ordinary’ claimants could rise to up to 9.96c in the euro, while the financial creditors remain in line to receive 100c in the euro plus interest. Image: Dwayne Senior/Bloomberg

Two weeks after a Cape High Court judgment that could deal a crippling blow to Steinhoff’s bid to settle with its former shareholders, the company has said that improved trading conditions enable it to increase its settlement offer to former shareholders by 66%.

The proposed improved offer would increase the payout to so-called market purchase claimants from between 4c and 6c in the euro to between 6.64c and 9.96c in the euro.

One shareholder who is backing a class action by Hamilton described the proposal as “from less than nothing to a bit more than nothing”.

In a Sens announcement issued on Friday afternoon the company also said it intends appealing the recent judgment and believes it has “reasonable prospects of success”.

The ruling by Judge Lee Bozalek declared that a key aspect of the original settlement plan, which involved Steinhoff providing guarantees to financial creditors who held €465 million of bonds that had been issued by Steinhoff in 2014, was legally void.

“It is not certain how long an appeal of the [Section] 45 judgment will take to be determined but, subject to the progress of [Steinhoff International Holdings Proprietary Limited’s] SIHPL’s Section 155 Proposal, it is expected to take at least several months,” said Steinhoff.

The long-suffering international retail group also revealed that the financial creditors, who hold the disputed bonds, are appealing the ruling.

Steinhoff’s frustration

Friday’s statement by Steinhoff reflected the board’s frustration at the ongoing challenges to its attempts to settle with multiple groups of claimants.

It stated that: “Those opposing the global settlement are working to delays its implementation despite the fact that delay will put at risk the interests of the large number of claimants who support the deal and who will otherwise face the prospect of waiting years for an uncertain outcome.”

Steinhoff also reiterated that four of the six active claimant groups and Dutch shareholder association VEB have supported the settlement.

However, it did not state what percentage of shareholders were represented by those four claimants. Indications are that Hamilton, which is opposed to the original settlement, represents at least 25% of the former Steinhoff shareholders. Moneyweb was unable to get a comment from Hamilton on the updated offer.

Shareholder frustration …

Those who oppose the offer, chiefly market purchase claimants who bought shares in the market, believe the financial creditors are benefiting at their expense.

The financial creditors, which include hedge funds that bought Steinhoff bonds at a fraction of their face value, are in line to receive 100c in the euro as well as rolled up interest of 10% a year. The third category of claimants, the contractual claimants such as Christo Wiese and GT Ferreira, will also benefit from improved terms.

On Friday Steinhoff said it continues to believe the global settlement, including the materially increased offer, represents a significantly better outcome for litigants and creditors relative to the outcomes in the event of no settlement.

Group CEO Louis du Preez: “The revised proposal offers claimants a fair outcome, and the best opportunity to recover amounts in respect of any claims in the near term and with certainty.”

He urged all claimants to support the revised proposal.

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The initial offer was so pathetic (0.05c/share) that a 66% increase is a joke.

Aren’t creditors of a company ahead of shareholders when it comes to financial claims against a company?. That’s what I remember from my corporate finance textbook, please someone correct me if I’m wrong

They are, but this is a offer to settle.
They can go to court and probably get nothing but a hefty lawyer bill.

The most infamous fraud in non-political history. How many were convicted?

I cannot understand why ‘contractual claimants’ stand to recover 5-6 times what ‘market purchase claimants’ will do. Both were equally duped.
In the case of Christo Wiese he was actually warned that Steinhoff was rotten but nevertheless pressed ahead with his massive investment in the company. He then became chairman for over a year. Despite many analysts waving red flags, the final collapse came as “a bolt from the blue” according to Wiese.
Why must someone so close to the coalface and who failed so miserably to defend the other investors now be compensated far more than them. In my view he should get less for dereliction of duty.

Fabelagtig, skimmelagtig….maar wat van Jooste?

Maybe fairer all around and to get rid of the stench : liquidate and let the chips fall where they may. Those hedge funds will quickly come running for a negotiated haircut.

Just don’t pay Wiese : his Southern View Finance was part of this charade all along.

End of comments.

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