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Wiese in talks with banks for standstill on margin loan

Steinhoff turns to Moelis and AlixPartners in fight for life.
Picture: Supplied

Steinhoff International Holdings chairman Christo Wiese, seeking to stabilise the embattled retailer, is negotiating a standstill agreement on a 1.5 billion-euro ($1.8 billion) margin loan under which banks would suspend the sale of stock until next year, according to people with knowledge of the discussions.

The owner of Mattress Firm in the US and Poundland in the UK needs a lifeline after its stock plunged last week when it delayed publication of its financial results because of possible accounting irregularities that prompted the resignation of chief executive officer  Markus Jooste.

Wiese, a South African billionaire who’s Steinhoff’s biggest shareholder, is stepping up efforts to save the company, which owes creditors as much as $21 billion. The shares rebounded slightly early Monday after Steinhoff said it appointed Moelis & Co to handle discussions with lenders and AlixPartners to advise on “liquidity management and operational measures.”

Last year, Wiese pledged 628 million of Steinhoff’s shares in collateral to borrow money from Citigroup, HSBC Holdings and Nomura Holdings. That was to participate in a share sale in conjunction with Steinhoff’s acquisition of Mattress Firm and Poundland, according to a company statement.

Bank of America Corporation, BNP Paribas , Goldman Sachs Group and JPMorgan Chase & Co are also lending banks on the margin loan, people familiar with the matter said. Representatives for BNP Paribas and UBS were not immediately available for comment. The other banks declined to comment.

The lenders are considering waiting until the publication of Steinhoff’s audited results, said the people, who asked not to be identified because the plan is confidential. An accord could come as early as this week though no final decisions have been made and plans could still fall apart, the people said. Wiese declined to comment.

Read: What Steinhoff owes its banks

The retailer “is currently fully focused on safeguarding operational liquidity to continue funding existing operations throughout its various subsidiaries,” Steinhoff said in a statement late Sunday. “The group is asking for and requires continued support in relation to existing facilities.

Lenders’ meeting

On Friday, after staying silent for much of the week as its shares and its bonds plunged, Steinhoff postponed by a week a crucial meeting with lenders that was set for Monday. Investec Plc said Monday that it has credit and derivative exposure to Steinhoff, without specifying the amount.

Steinhoff’s shares were up 13% at 1:45pm after gaining as much as 24% in Frankfurt, where the company has its primary listing. In Johannesburg, the shares were up as much as 38% to R8.30 at 3.10pm. Last week’s free-fall wiped out a majority of the net worth of Wiese and an investment by the Public Investment Corporation, which manages the pension funds of South African government workers.

 

Steinhoff share performance

 

The company had been on an acquisition spree since Wiese bought into the company via the sale of his African chain of Pep stores in 2014. Wiese, 76, is now valued at $1.8 billion, compared with $4.4 billion on Tuesday, according to the Bloomberg Billionaires Index.

© 2017 Bloomberg 

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Steinhoff needs to communicate with all its stakeholders more swiftly, more openly, in more detail and urgently or the support of the financing institutions won’t matter if the market (shareholders and clients) dwindle away and abandon Steinhoff just as the board is currently abandoning their shareholders through their lack of active communication.

Any suggestions would be welcome.

One would like more the company to tell the market about the directors.
E.g Relating to former and/or current directors of Steinhoff or it’s related companies:
Are there any directors exposed to the company’s or related companies’ shares by means of derivatives.
What is the strike/knockout price of those derivatives?
What is the total notional value of the derivatives?
Has there been any marginal calls or forced sales due to price targets (of those derivatives) been breached?

End of comments.

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