Ann Crotty Writer-at-large

The sale of R3.75bn Steinhoff Africa Retail (Star) shares did little to settle investor nerves on Thursday amid concern about the extent of loans to directors after media reports of a €325m prepayment to former chairman Christo Wiese.

"That financial facility, which apparently has not been repaid, raises the spectre of many similar type payments to related parties, and if that’s the case no one knows how big the Steinhoff hole is," one analyst said on condition of anonymity.

Unlike South African law, Dutch law, which is the relevant law as Steinhoff is registered in Holland, does not hold the non-executive directors personally liable for the reimbursement of shortfalls suffered in relation to loans to directors.

All that the members of a Dutch board have to consider are the nonbinding principles set down in the Dutch Corporate Governance Code.

One best-practice principle states that a company may not grant personal loans, guarantees or substantially similar facilities to directors and supervisory directors unless they are made in the normal conduct of the business.

No force in law

If such facilities are granted, they do require prior consent of the supervisory board and loans to directors may not be absolved.

In Holland, members of the supervisory board are equivalent to nonexecutive directors in SA.

However, unlike SA’s Companies Act, the governance code has no force in law.

This will be of major comfort to the directors who have remained on at Steinhoff and whose fiduciary duties to the company may limit their ability to jump ship.

On Thursday, the Steinhoff share price remained below the R3 level, and at R2.50 is almost half the R4 level at which it traded when it was first listed on the JSE in 1998. There was little sign of reaction to the announcement by the firm that it had successfully placed 200-million of its shares in Star at a price of R18.75 per share, a discount of 2.6% to Star’s closing price on Wednesday. The company said the placement had been multiple times oversubscribed.

Steinhoff said the placement of 6% of Star, which owns the African operations of Pep, Ackermans, Tekkie Town and JD, was aimed at settling its South African debt.

It is the latest in a string of high-quality asset sales, which have included PSG and KAP shares, aimed at paying down the debt obligations of the group. Steinhoff assured investors on Wednesday that it intended to retain the remaining 71% of the retail group.

Many investors, however, fear that Steinhoff may not have the final say on what happens to its valuable stake in Star.

The African retail group appears to be ring-fenced from most of the problems that have knocked Steinhoff, but given the levels of uncertainty and the steady stream of bad news from the company, few believe that it has announced the last of its asset sales.