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Steinhoff’s no-news Sens statements

It’s as though the board is trying to make up for its refusal to release the PwC forensic report into the group by dribbling out an equivalent 3 000 pages of ‘announcements’.
No big news is likely to emerge from Steinhoff until May 5. Image: Dwayne Senior, Bloomberg

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.

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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.

Support

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.

Significant aspect

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.

Read:

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.

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COMMENTS   17

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The most tiresome soap opera in SA corporate history. And like all soap operas the storyline keeps repeating itself. This company should be liquidated ones and for all. The lesson learned: Avoid any company with a convoluted web of ownership structures that are only understood by insiders in the company or quantum physicists(tongue in cheek) like an elderly person avoiding Covid.

You seem like the same guy that puts his money in sanlam, BAT and ETFs.

Good luck trying to retire on that.

That gets you a labrador and a small house next to the N2 next to the Engen stops.

Its fine to take risks. Just don’t have concentrated positions.

As far as Steinhoff Goes, this is all just media play. It will get accepted because it has to. Your business as a lawyer is done if you cause the crumbling of 100k jobs to get your client .1 cent on the dollar.

You must be a quantum physicist tripleleveretf. I’m a simple layman who likes transparent corporate governance, aligned interests between management and shareholders and honest financial statements in companies I invest in, if that makes me stupid I’ll accept that as my fate.

My point being. We get it. The stocks at 2 rand.

Get off your high horse beating down Steinhoff. You’re about 4 years late to the party. If you “warned” people then, your opinion would be worth something.

Move on to your 1% dividend stocks in broken sectors. Some of us understand Steinhoff, understand and have worked in restructuring, understand that Mgmt took massive write-downs to take the pain back in 2018-2020, understand that bankers are milking the company for fees. More importantly some of us understand the return profile is positively symmetrical and the tide is turning.

A 30% shareholder accepted the settlement deal, yet you want to cry about morals and governance. I have ready every single sens and creditors document. Even the SUSHI one.

This is a hit piece that talks about the company being transparent at talking to investors. Also the same
Author that didn’t know how a margin call
Worked back in December 2017. Strange hill
To die on.

Just some insight. I’m not astrophysicist, but why was invested in GameStop since April 2019. Good things take time. Just saying.

Could I be wrong? Yeah. But I want to believe markus will be in jail and Pepkor and pepco will prosper and don’t see liquidations the answer.

Correction : management did not take massive write-downs. Shareholders did. The hired help get overpaid regardless.

Taking massive write-downs is easy. Couple of journal entries, off to Hermanus for the weekend looking forward to the next earnings release when you can announce 30% increase in headline this or normalized that.

Some investors look at cashflow. Those that did avoided Jooste and Wiese all along.

Fair enough @johan buys.

Why liquidated ?

That makes zero sense .

Agree. Any current MPC shareholder would gain more from even a mild recovery in the share price than from the crumbs offered by claim settlements. Isn’t it time to be forward looking? (Dr. Wiese’s earliest comment was that there are many solid businesses within Steinhoff – these did not evaporate, and with TIME in the market everything looks and proves to be better in the end)

It is no longer viable as going concern(Auditing-speak) at least as it is currently structured. The good parts can be carved out but the rest is a house of cards based on a fraud. It’s not that hard to understand The oracle of RSA.

You understand how a carve-out works?

What’s your suggestion – LBO?

Fire 40% of staff and exit at a nice multiple on 7 years? Yeah that’s some great value destruction.

I mean the level of understanding on these forums is so low.

You want to make accusations but come with facts and a roadmap.

You know what’s worse than an investment banker? A private equity partner. Your carve out suggestion is suicide.

Last time I checked , they still had their doors open. They still have customers and there is still money to be made.

Yes , the debt burden is huge , but so is the income potential.

Pepkor had a great year and they repaid debt, they generated big cash flow. There are still great businesses in steinhoff , it’s a question of keeping the vultures at bay

Exactly my point, Pepkor should be carved out because it’s a good business the other businesses like the mattress businesses are junk.

Mattress firm junk?

Its just reported strong profits? What are you even talking about.

Did you even bother to download their statements.

I mean honestly this is blatant short selling drivel.

Pepkor is a darling I am sorry but they can unbundle pepkor from steinhoff all the other crap can go, pepkor has a solid balance sheet, very profitable and growth orientated. The management team is young and their market position is strong. Look at pep them and pep today Higher to lower Lsm buys at pep, pep sells top end and lower end that’s the big selling point. Personally the
history of Pep in SA it must stay, do not liquidate because if they throw out Pep to the dogs gosh who knows what’s next

I wonder how many of the pro Steinhoff commenters have ever:

1. Bought stuff at their local stores.

2. Dealt with the toxic fall-out from the credit agreements on fugly couches that your workers come and seek help with.

It is a nasty business. Never invested, never will. There are more than enough pleasant businesses out there.

A fish rots from the head. This businesses is rotten from all dimensions, but especially from the corrupt Board.

My question then becomes. If it’s such a nasty business, how did it survive the pandemic? I’m not sarcastic but curious. Many big businesses went bankrupt during the pandemic. It can’t just be because “feeding off the carcas”. There needs to be some meat left.

Surely it makes no sense?

Why keep it open. And how are they obtaining financing if collateral (aka warehouses, real estate and even Steinhoff and Pepkor shares) are so worthless.

Seems like a very slow banker would do that without strong collateral or maybe they see upside of building the Steinhoff company relationships given blue sky outcome.

Everybody told me do not to buy Steinhoff shares…the company is going to get liquidated. On 7 April one Steinhoff share was trading at R1.01 – Today the share price is trading at roundabout R2.33. Up 133% from last year. Pepco EU might also be listed separately in the coming year.

Mattress Firm

“Mattress Firm is benefitting from its business transformation initiatives and the surge in home-related consumer spending,” said Moody’s analyst Raya Sokolyanska. “With good liquidity and moderate debt levels, the company has the flexibility to address a potential reversal in the currently strong demand trends, while continuing to evolve its business to meet consumer purchasing preferences amid a competitive landscape.”

My predictions are R5 – R6 by the end of the year. This share might be one of the best opportunities to make large amounts of money. I might be wrong.

I did my own research about Steinhoff and all the businesses within the company. My feeling is very positive at this stage.

I am no expert, but sometimes you need to take some risk.

End of comments.

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