Steinhoff Proposes $1 Billion Settlement to End Legal Claims

Bookmark

Steinhoff International Holdings NV proposed a $1 billion settlement to resolve more than $8 billion of legal claims lodged against the retailer following the accounting scandal that almost wiped out the company.

Claimants would get a combination of cash and shares in Pepkor Holdings Ltd., a clothing retailer controlled by Steinhoff, the company said in a statement Monday. Most of the 90 claims outstanding are included in the deal.

The proposal is the culmination of 12 months of “intensive effort,” the company said, and would mitigate the steep legal fees Steinhoff has incurred since accounting irregularities were first uncovered in 2017. The retailer last year struck a deal with creditors to skip principal and interest payments on its borrowings through next year.

The settlement would help cover as much as 266 million euros ($311 million) of market-purchase claims, 104 million euros of contractual-party claims and about 9.4 billion rand ($567 million) of claims against the holding company Steinhoff International Holdings Pty Ltd.

Steinhoff’s proposal “is realistic” if not generous, and clears a path to talks with creditors, Bloomberg Intelligence analyst Charles Allen said in a note. With 69% to be paid in Pepkor shares, it “would be a good result, if accepted by the litigants.”

The shares of Pepkor, Africa’s largest clothing retailer, would be priced at 15 rand per share for most holders.

The proposal would allow Steinhoff to move on to tackling its 9.6 billion euros of gross debt, plus the accrued payment-in-kind interest, according to Allen. A share sale of European discount retailer Pepco Group and the sell-down of Pepkor shares “could provide funds to address the issue” because the two rank as the company’s most profitable units, he said.

“Although there is no certainty yet that we will be able to conclude this settlement, in our view these terms are firmly in the best interests of all stakeholders,” Chief Executive Officer Louis du Preez said in the statement.

The stock climbed as much as 13% in Frankfurt on Monday, before paring the advance to trade 7.7% higher at midday.

The plan includes former Steinhoff Chairman Christo Wiese’s 59 billion-rand lawsuit. The 78-year-old former executive has the biggest single claim against Steinhoff because he became its largest shareholder when he sold Pepkor to the firm in 2015.

The proposed settlement doesn’t cover claims made against former directors and executives of Steinhoff units.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.