Steinhoff Seeks New Debt Extension as Investors Suffer Further

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(Bloomberg) -- Steinhoff International Holdings NV is seeking another extension to restructure almost $12 billion of debt as the retailer strives to keep shop doors open and increase the value of some of its assets.

The South African retailer will probably miss a June 30 deadline for agreeing a debt deal, the owner of Conforama in France and Mattress Firm in the U.S. said in its 2018 annual report published late Tuesday. Steinhoff needs time to prepare some divisions for an eventual sale that will enable it to repay creditors, the company said.

The way the debt restructuring has been put together “is to avoid fire sales and to rather give the company a few years to run the business and see what value it can get,” Charles Allen, an analyst at Bloomberg Intelligence, said by phone on Wednesday.

Alongside the annual report, Steinhoff published its second set of full-year audited earnings in as many months. While the company reduced its loss by 70% to 1.2 billion euros ($1.3 billion) in the year through September, that wasn’t enough to appease investors.

The shares slumped 6.1% as of 1:38 p.m. in Frankfurt, extending the loss since the start of the crisis to 97%. The yield on the 800 million euros of bonds due January 2025 was little changed.

Steinhoff’s payment-in-kind interest payments of about 10% on the 10.4 billion euros of gross debt means “equity holders are unlikely to even receive crumbs,” Allen said.

Steinhoff has already sold several assets since the eruption of an accounting crisis more than 18 months ago, including Austrian furniture retailer Rudolf Leiner GmbH and stakes in Pepkor Holdings Ltd. and KAP Industrial Holdings Ltd. The disposals served to help shore up the company’s balance sheet as it sought to stay afloat.

Steinhoff’s assets were valued at 16.4 billion euros as of September, compared with 17.5 billion euros the previous year, the company said in a presentation on its website. The retailer had previously made 15.3 billion euros of writedowns because of accounting irregularities, as former management led by ex-Chief Executive Officer Markus Jooste allegedly oversaw a series of related-party transactions that inflated profit and asset values.

In addition to the debt restructuring, Steinhoff is keeping a tight grip on spending to help strengthen its cash position. Sales in 2019 are expected to drop because of further asset disposals, more competition and a weak trading environment.

“Still, it’s quite an achievement to have kept the various businesses going and to have received proceeds for selling some of its loss-making units,” Allen said.

©2019 Bloomberg L.P.

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