Moody’s casts further doubt over Steinhoff with latest downgrade
This is the agency’s second downgrade of the company in a month, and reflects its belief that there is a ‘substantial risk’ of a debt default
Steinhoff International’s debt was further downgraded by ratings agency Moody’s on Thursday, putting the company deeper into junk status. They warned further downgrades could follow due to the ongoing cash crisis facing the company in the wake of the accounting scandal that led to the resignation of CEO Markus Jooste.
Moody’s said Steinhoff’s financial situation has been under strain following more than $12bn being wiped off its market value after the news of accounting irregularities at the firm broke. Furthermore, Steinhoff told investors this month that it was losing credit lines from some lenders.
Moody’s, which had already downgraded Steinhoff’s credit rating earlier this month, cut its rating for Steinhoff International Holdings to Caa1, the seventh tier into junk territory.
The additional downgrade reflected the increasing pressure on the company’s liquidity, Moody’s said. “The situation has been compounded by its operating companies placing an additional liquidity burden on Steinhoff’s centralised treasury function to fund their working capital needs.”
Steinhoff faced $2bn worth of loans maturing between 2018 and 2020, Moody’s said, with the interest on them expected to shoot up by at least 250 basis points above the benchmark lending rate of European banks in response to the latest downgrade.
At 3.07pm, on the JSE, where the company has a secondary listing after its main one in Frankfurt, Steinhoff shares were up 0.43% to R4.64.
Prior to the resignation of CEO Markus Jooste earlier this month, Steinhoff shares were trading at about R55.