Steinhoff likely to pay interest on debt for the near term and refinance SA borrowings
Lenders are also reported to have backed a move to prop up the company’s troubled European operations with liquidity from healthier South African subsidiaries
Steinhoff International Holdings expects to be able to pay interest on debt for the near term and plans to refinance all borrowings within SA as the global retailer battles to survive an accounting scandal.
The new financing agreements will enable the owner of Mattress Firm in the US and Conforama in France to free up funds for the rest of the company, Steinhoff said in a statement on Thursday.
Based on projected cash requirements in Europe, the retailer is seeking about €200m ($245m) from South African lenders, it said.
The move is an early sign that the Frankfurt- and Johannesburg-listed company is making progress with crunch talks with lenders on how to continue operations after it reported accounting irregularities last month.
The stock gained as much as 8.2%, reducing the drop since the scandal broke to 85%. CEO Markus Jooste and chairperson Christo Wiese, who is also the biggest shareholder, have both resigned.
Steinhoff said it would give an update on trading for the three months up to the end of December in the last week of February. The company has appointed PwC to investigate the accounting issues and will update on the progress of the probe "as soon as it is able to do so".
Reuters reported that lenders have backed a move to prop up the company’s troubled European operations with liquidity from healthier South African subsidiaries.
A first instalment of €60m ($73m) of a total €200m it is seeking will be received this week, Steinhoff said in a statement, adding it was seeking consent for further instalments.
"It is expected that any funds so received will be available to meet business-critical payments during the next phase of the group’s stabilisation plan," it said.
Sources close to the negotiations told Reuters last week that Steinhoff was racing to plug a €200m funding gap to avoid a small unit such as Austrian Kika-Leiner pulling down the entire group.
"To date, additional external liquidity has not been obtained in the time available given the complexity of the group structure and the terms of the existing financings, although additional external liquidity may be required in the future," Steinhoff said on Thursday.
It also said it would ask its creditors in the coming weeks to waive some payments that are due soon under existing financing arrangements for its European business.
Last month, the group last month admitted "accounting irregularities" as it built a debt-fueled empire stretching from Poundland in Britain to Mattress Firm in the US. The admission wiped about $15bn, or 85%, off its market value.
“To date, additional external liquidity has not been obtained in the time available given the complexity of the Group structure and the terms of the existing financings, although additional external liquidity may be required in the future,” Steinhoff said on Thursday.
It has scheduled another meeting with its European-based financial creditors for January 26, and said it would ask its creditors in the coming weeks to waive some payments that are becoming due under existing financing arrangements for its European business. It will also seek to refinance or redeem, as soon as possible, some or all of its debt in SA to release additional funds to use for the rest of the group, it said.
Once the short-term funding issues have been resolved, Steinhoff will have to decide whether asset disposals and refinancings will suffice or whether it will opt for a full-blown debt restructuring.
Roughly €2bn of Steinhoff’s €10.7bn in debt matures this year.
Steinhoff’s top nine banks, with an exposure of more than €500m to the retailer, are Commerzbank, UniCredit, Credit Agricole, BNP Paribas, JPMorgan, HSBC, Citi, Mizuho and Bank of America. However, Steinhoff is also talking to third-party investors such as hedge fund Davidson Kempner — which supplied the Poundland loan — about their interest in supplying fresh money, sources have said.