It has to be said that there’s not much Steinhoff could get right these days as far as the investing public is concerned.
Its updates, provided through a regular feed of Stock Exchange News Service (Sens) announcements, are presumably intended to keep shareholders abreast of the latest developments in a hugely complicated and highly litigious process. But in its attempt to provide details while not disclosing one iota of information that could be used against it in a court battle at some later stage, each announcement manages to do little more than add to the confusion.
It doesn’t help that most of these announcements are not only dense but are remarkably long. It is as though the Steinhoff board is attempting to make up for its refusal to release the 3 000-page PwC forensic report into suspected accounting irregularities at the firm by dribbling out the same volume of dense Sens announcements.
The latest announcement, which was issued last week, reveals that four of the six active claimant groups (ACGs) have backed the Steinhoff Global Settlement proposal. Each ACG represents a collection of Steinhoff shareholders who purchased their shares in the market. These shareholders are categorised – by Steinhoff – as market purchase claimants (MPCs). They are distinct from the contractual claimants (CCs) such as former Steinhoff chair Christo Wiese and major investors such as GT Ferreira.
According to the latest Sens announcement: “Four large active claimant groups who represent market purchase claimants based in South Africa and elsewhere, have confirmed their support for, and will recommend that their respective constituents support, the Steinhoff Global Settlement and its implementation by way of the Dutch suspension of payments commenced on 15 February 2021 and the S155 proposal under South African law.”
The backing of these four ACGs means that any litigation they have initiated against Steinhoff and its former directors and officers will be suspended immediately.
The litigation will be terminated, says Steinhoff, “after the successful implementation of the Dutch SoP [suspension of payments] and the S155 proposal.”
The four ACGs are Burford Capital, Deminor Recovery Services and DRRT/Therium.
Although the Sens announcement describes the ACGs as “large”, a spokesman for Steinhoff told Moneyweb they do not know how many Steinhoff shareholders they represent. They will not know until May 5, by which date all claimants must have registered their claims.
“Computershare will then check/confirm the submissions and calculate the claim values. As such we will only really know the detailed numbers some time between 2 May and the scheme meeting,” said the spokesman.
However, the number of ACGs backing the proposal has some significance as Steinhoff has said that if it gets the backing of five of the six ACGs then the Deloitte and D&O insurers’ offer to MPC claimants will become effective.
The D&O insurers – companies that provided Steinhoff with directors and officers (D&O) liability insurance – have agreed to pay €78.1 million towards legal settlements resulting from the implosion of Steinhoff that followed news of accounting irregularities in December 2017. Separately, Deloitte, which was Steinhoff’s auditor during the period of accounting irregularities, has offered a settlement of €77.9 million to investors.
Having said that these two settlements will become effective if five of the six ACGs back the Steinhoff Global Settlement, Steinhoff then adds that the offer will also become effective “if Deloitte and the D&O Insurers otherwise agree”.
This final point raises the question of why they bothered to announce they had secured the backing of four ACGs, particularly given that the Deloitte and D&O settlements will only be paid out when/if the global settlement is finalised.
The most obvious answer, although not necessarily the correct one is, to put pressure on the remaining two ACGs to come to some agreement.
Steinhoff’s Sens statement reveals that Deloitte and the D&O insurers are continuing to engage with the two remaining ACGs.
Neither of the names are disclosed but one is understood to be the shareholder grouping managed by Hamilton and involving Dutch law firm Barentkrans. To date this group, which is backed by more than 25% of Steinhoff’s shareholders, has indicated that it is firmly opposed to the Global Settlement.
Much of this opposition is due to what it perceives as the comparatively unfair treatment being afforded the MPC shareholders. The global settlement will see the CCs getting between eight and 15 times more than the MPCs.
Legal sources contend that continued opposition from Hamilton, which represents such a large block of shareholders, would make it almost impossible for a S155 action in South Africa to succeed. Critically, a S155 action needs the backing of at least 75% of shareholders.
This means that unless a deal is struck with Hamilton, it is unlikely that any substantial news will emerge from Steinhoff before the scheme meeting in May.