Steinhoff CEO Pays Share-Backed Loan Taken Days Before Fall

(Bloomberg) -- Steinhoff International Holdings NV said acting Chief Executive Officer Danie van der Merwe repaid a 26.4 million-rand ($2.1-million) loan backed by company shares that he took out a week before the retailer’s stock collapsed because of an accounting scandal.

The timing of the loan raises questions about how much Van der Merwe knew about the financial malpractice that has brought the company to the brink of collapse. Acting Chairwoman Heather Sonn told investors last month that any current executive would quit if they were implicated in any wrongdoing, while Steinhoff is the subject of legal claims including a 59 billion rand lawsuit by former biggest shareholder Christo Wiese, who also served as chairman of the company.

“The timing of the loan application is highly suspicious,” the Federation of Unions of South Africa said in a statement. “There is absolutely no way that Steinhoff top executives, including Van der Merwe, could not have full knowledge of what was going on, on the eve of the share collapse, made up predominantly of public servants pensions.”

Van der Merwe’s personal investment company Ruby Street Investments Pty Ltd. borrowed the funds from Investec Plc on Nov. 29, the same day that companies owned by former CEO Markus Jooste and his son-in-law Stefan Potgieter took out a 93 million rand loan from the same bank, according to a court filing by Investec in December. Both loans were backed by Steinhoff stock and were arranged by Potgieter.

Steinhoff reported accounting irregularities on Dec. 5, causing the shares to crash more than 80 percent in three days. Jooste quit immediately, and has since been referred by the company to an anti-corruption police unit. He hasn’t commented publicly since. Van der Merwe was Steinhoff’s chief operating officer at the time, and was made acting CEO on Dec. 19.

Van der Merwe was sued alongside Jooste and Potgieter by Johannesburg-based Investec days after the Steinhoff share collapse. The bank said that when the loans were agreed all three must have been aware of accounting concerns that led to the plunge in the share price and didn’t inform the lender, according to the court filing. The clerk of the High Court in Cape Town said she wasn’t aware of any formal responses filed in the lawsuit.

Private Loan

A Steinhoff spokeswoman said Van der Merwe had a private-loan arrangement with his personal bank at the end of November and has since settled the debt. It’s standard practice for lenders to accept personal assets as security for loans and the transactions have no implications for the company, she said in an emailed response to questions. Van der Merwe didn’t respond to a request for comment.

Investec has settled the matter with the relevant parties, the bank said in emailed comments, declining to comment further. Neither the lender nor Steinhoff detailed how or when Van der Merwe repaid the loan.

Click here to read about a lifeline granted to Jooste

“I am not sure what Danie’s intention was with that money. Why take out a loan and then pay it back a few weeks later?” said David Shapiro, the deputy chairman of Sasfin Wealth in Johannesburg, who has been trading stocks in the city since 1972. “Why would Investec just loan them the money like that? One must ask what analysis was done on the company’s books before handing out money like that.”

Ruby’s loan request was the company’s first from Investec since December 2012, the lender said in the court documents. Van der Merwe joined the Steinhoff board in 1999, the year before Jooste became CEO.

Jooste’s investment company, Mayfair Holdings Pty Ltd., has been given until the end of the year by lenders to sell as much as 2.08 billion rand in assets ranging from real estate to racehorses to repay almost 1.6 billion rand of defaulted loans, according to an agreement between Mayfair and its creditors seen by Bloomberg. That includes the 93 million-rand loan taken out on Nov. 29. The accord makes no mention of Ruby’s dealings with Investec.

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