Steinhoff’s flurry of Sens announcements continued on Wednesday, with the company announcing the terms of a new agreement with its former chair Christo Wiese that includes an undertaking to repay a €200 million (R3.5 billion) loan provided by Steinhoff to Wiese-related entities in November 2017.
The Sens announcement stated that an earlier conditional agreement, reported last month, between Steinhoff, Wiese-related entities and Conservatorium has become unconditional on the basis that the Wiese-related entities would support Steinhoff’s proposed global settlement.
US-based Conservatorium launched court actions against the Wiese-related entities last year claiming it was the legal successor to lenders who had provided the entities with €1.6 billion to purchase shares in Steinhoff.
On Wednesday Steinhoff confirmed that the new agreements with the Wiese-related entities included agreement to document the partially secured five-year payment obligation between Steinhoff and Wiese-controlled Titan. The payment obligation relates to prepayments made to the entities ahead of the aborted transaction between Shoprite and Steinhoff.
Details of the amended ‘Section 155 proposal’ were released on Tuesday and reveal that Titan now appears to dispute that it originally owed €200 million to Steinhoff. Previous versions of Clause 17.5 of the proposal made no reference to Titan disputing the €200 million obligation.
Shareholders first became aware that in late 2017 Steinhoff had made prepayments to Wiese-related entities of €325 million when the company released its 2017 annual report in May 2019.
According to the annual report the prepayment was made in anticipation of the Wiese-related entities selling 128 million shares in Shoprite to Steinhoff subsidiary Pepkor. The financial review states that: “Pepkor’s board exercised the call options [which gave it the right to acquire the shares] prior to 30 November 2017 as part of the planned expansion of the Pepkor group, subject to the fulfilment of conditions precedent.”
As part of that planned expansion Pepkor was listed on the JSE in October 2017 and renamed Steinhoff Africa Retail.
In October 2017 Steinhoff paid the Wiese-related entities €125 million and followed up with a €200 million payment in November 2017.
Days later news broke of financial irregularities at Steinhoff and the proposed transaction was abandoned.
€125 million was repaid in early 2018 and according to the 2017 annual report: “The balance of €200 million plus interest will be repaid on agreed terms.” No details of the agreed terms or the rate of interest were given.
However, Section 17.5 of the proposal now reveals that the €200 million carries an interest charge of 5.04% a year, which is rolled up and is comfortably below the 10% Steinhoff is paying its creditors in terms of the three-year debt-standstill plan.
The debt plus interest owed by the Wiese-related entities has to be repaid five years after the date that the proposal becomes effective, which market-watchers say is unlikely to be before 2022.
This means it could in effect be a 10-year loan.