Steinhoff races to avoid cash crunch at subsidiaries
‘Originally the idea was that a lot more money would be raised at group level…. But it is clear these businesses don’t trust the group’
Frankfurt/Munich/London — South African furniture retailer Steinhoff is racing to plug a €200m funding gap in the next few days to avoid a small unit such as Austrian Kika-Leiner pulling down the entire group, sources close to the negotiations said.
Steinhoff last month admitted "accounting irregularities" as it built a debt-fuelled empire stretching from Poundland in Britain to Mattress Firm in the US. The admission wiped about $15bn or 85% off its market value.
Its two top executives, who turned the group from a modest German furniture distributor into a global household goods giant, have resigned, as has its chairman, and the group is currently being run by an acting chief executive while its former finance chief works full-time on securing financing.
In talks with creditors, Steinhoff had conceded it has a funding gap of €550m, the sources said, adding that deals that had already been struck or were imminent brought the total down to about €200m.
Talks with banks and other potential creditors about the remaining amount for the group and its subsidiaries were advanced and could be concluded within the next week, the sources said.
"The main goal right now is to avoid any Steinhoff unit running out of cash and potentially pulling down the whole group," one of the people said, adding that the new credit lines would probably plug financing needs for only three months.
Steinhoff was not available for comment.
Jet for sale
Kika-Leiner, with annual sales of about €800m in Austria and eastern Europe — where founder Bruno Steinhoff sourced his goods in the Communist era — remains the unit with the single largest financing gap, even after selling €50m worth of property to investor Rene Benko, the sources said.
A private company jet, which may fetch about €15m, has also been put on the block.
The company was also in the final stages of putting the finances of more subsidiaries on a new footing, after securing fresh money for Poundland and Mattress Firm over the last three weeks, they said.
French unit Conforama is raising €200m in financing with the help of adviser Rothschild, the people said.
"Originally the idea was that a lot more money would be raised at group level, which included raising money for the UK and French subsidiaries," said one restructuring adviser.
"But it is clear that these businesses don’t trust the group and wanted to do their own financings with their own advisers."
Other units include Harveys in the UK and Poco in SA, Australia and Germany — where the group now has its main listing and where it is also under investigation for suspected accounting fraud.
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, Calyon, BNP, JPMorgan, HSBC, Citi, Mizuho and Bank of America.
But Steinhoff is also talking to third party investors like hedge fund Davidson Kempner — which supplied the Poundland loan — about their interest in supplying fresh money, the sources said.
The senior debtholders have picked restructuring consultant FTI as their joint adviser, the sources said.
FTI and the banks declined to comment or were not immediately available for comment.