‘Give them hell’: Steinhoff shareholders reject debt restructuring deal

Steinhoff’s future hung in the balance after shareholders of the embattled retail holding firm voted against a debt restructuring deal this week, substantially raising the prospect of liquidation, which is likely to leave nothing on the table for equity investors.

Under the deal, shareholders would have left with 20% in an unlisted vehicle while debt holders would take 80% of the firm and extend the debt repayment date for three years. Shareholders were told there was no guarantee the 20% would have any value but it was their best hope.

However, 61.45% of shareholders voted against the deal at a meeting in Amsterdam on Wednesday. Steinhoff warned it would leave them with no stake at all in the company.

This could mean the end of Steinhoff, which five years was hit by a multibillion-rand accounting fraud that triggered a selling frenzy and attracted hedge fund investors.

Steinhoff, registered in the Netherlands, has a €10bn (R200bn) debt pile due in June that it cannot pay. It will now either go into a Dutch court-type procedure called WHOA (Court Approval of a Private Composition Prevention of Insolvency) Act used to avoid bankruptcy and come to an agreement with creditors. Or creditors, mostly hedge funds, will take what is owed to them in June.

Steinhoff, which owns 44.5% of Pepkor and 75% of European discount retailer Pepco, has debts exceeding its assets by €3.5bn.

Before the vote, the company said if the debt reorganisation plan failed to get over the line, there could be a fire sale of assets by creditors, where the seller rarely gets a good price.

But it is likely the hedge funds that own its debt will take time to unwind the firm and realise as much money as possible.

Once a must-have in any portfolio, Steinhoff has been preoccupied over five years with forestalling bankruptcy after its share price crashed, sparking lawsuits worth R184bn by 8,000 shareholders who say they were duped into buying worthless shares.

CEO Louis du Preez managed an almost miraculous R24bn settlement, finalised in January 2022, before turning to the mountain of borrowings.

In December, he struck a deal with 64% of lenders giving them an 80% stake in the company in exchange for extending the June 2023 repayment deadline. “On a personal level, this has been a really difficult journey. You wake up in the morning, [and] no one wishes you well. Everyone wants to fight and today is no different.”

Marc Liebscher, a lawyer at Dr Späth & Partner in Berlin, who has taken German financial regulator Bafin to court and instituted a class action against auditors Ernst & Young in the Wirecard fraud case, said he would fight against Steinhoff using courts to go into bankruptcy protection.

“This will be our pet project for the next 10 years,” he told the shareholder meeting, live-streamed on the web.

“Are you aware that our war chest for lawyers is filled to the brim? I represent around 1,800 shareholders and I’m sure after today it will be even more. Rest assured. We will prevent this robbery from happening.”

Shareholder Nicholas Vosswinkel told Du Preez he could not believe after he had negotiated so many settlements that eventually hedge funds had outplayed Steinhoff.

“You have done an amazing job,” he said. But news in December that lenders would take over the company was more than a punch to the stomach. “And I lost all the faith I had in you.”

Vosswinkel lambasted the hedge funds that demanded at least 80% of the firm with no discount on the debt, despite buying the debt for less than they were owed.”

“Give them hell. Give them real hell,” he said.