Imagine you own an asset such as a house with a value of R1m — fully paid off — and you take out a loan of R400,000 against the house. Suddenly your asset drops to a value of R100,000 after the real estate company realised you lied about the number of rooms in the house, and the bank then wants to reclaim its full loan. Despite pleading with the bank that you cannot pay back the loan, it remains resolute: cough up, or you are evicted. Although somewhat of a far-fetched analogy, this is the situation in which retail magnate Christo Wiese finds himself since the plunge in Steinhoff’s share price. The only real recourse one has is to use other assets to pay the bank. Wiese has tried this, to offset some of his other interests against Steinhoff. But it remains a slippery slope, as creditworthiness and reputational risk come into play. In the end it usually means one thing — bankruptcy or insolvency. Using this analogy for Wiese is far less far-fetched. According to Bloomberg’s own billi...
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