Steinhoff’s Markus Jooste thrown a lifeline by banks
His company Mayfair Holdings owes Sanlam, Investec and Absa a total of R959m; the lenders think a break-up agreement will realise more money than liquidation
Steinhoff International Holdings’ former CEO Markus Jooste has been thrown a lifeline by banks as the global retailer he oversaw for 18 years struggles to survive an accounting scandal that happened under his watch.
His personal investment company Mayfair Holdings owes Sanlam’s capital markets arm, Investec and Absa, a banking unit of Barclays Africa Group, a combined R959m backed by Steinhoff stock, according to an agreement between Mayfair and its creditors seen by Bloomberg.
After Steinhoff shares crashed when the company reported a hole in its accounts in December, Mayfair defaulted on the loans as it wasn’t able to immediately repay them. That gave the banks an option to liquidate the company or come up with a break-up proposal to release capital.
The lenders agreed that the latter would realise more value, and have given Mayfair until the end of this year to sell as much as R2.08bn in assets ranging from real estate to racehorses to repay almost R1.6bn of loans to the banks and other creditors. As well as the lenders, creditors include two companies tied to Jooste and his son-in-law, Stefan Potgieter, which may realise more than R200m from the disposals, the documents show.
Mayfair will also be able to keep any proceeds left over after creditors are repaid, which could amount to about R500m.
Steinhoff has distanced itself from the former CEO, who quit on December 5, and have referred him to an anti-corruption police unit. The owner of Conforama in France and Mattress Firm in the US has also started a probe into its finances that has so far uncovered the inflation of income and asset values over several years. The investigation is ongoing.
A so-called scheme of compromise "allowed a standstill until December 2018 to allow the Mayfair entities to sell assets in an orderly manner to benefit all creditors", Absa said in an e-mailed response to questions, adding that all creditors backed the plan. A person who answered the phone at Mayfair’s Cape Town office said the company won’t comment. Jooste didn’t respond to a cellphone message seeking comment.
As well as the R200m owed to companies linked to the former CEO and Potgieter, a further R420m is owed to a company owned by Malcolm King, a property tycoon and one of Jooste’s friends, the scheme of arrangement shows. Potgieter is the sole director of Mayfair after Jooste quit in December. Neither Potgieter nor King immediately responded to e-mailed requests for comment.
"We continue to engage with the Steinhoff group of companies with respect to any monies owed by them to Investec," said Ursula Nobrega, the lender’s head of investor relations. Sanlam reiterated in e-mailed comments that the creditors saw an orderly sale process realising more value than a liquidation.
Jooste and Potgieter were hit with legal claims by Investec and Absa days after Steinhoff reported the accounting wrongdoing on December 5. The banks contended that loans taken out by Mayfair and backed by Steinhoff stock — including R93m a week before the financial irregularities were reported — were made while Jooste knew of the impending share collapse. Absa described the dealings as "naked fraud", in the court papers. The clerk of the High Court in Cape Town said she wasn’t aware of any formal responses filed yet in the lawsuit.
The current management board led by acting CEO and former chief operating officer Danie van der Merwe didn’t know about the accounting malpractice even though they were working in senior positions at the company, according to chair Heather Sonn, who said on Friday that all had pledged to quit if they are found to have engaged in any wrongdoing.