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Steinhoff completes financial restructuring, adds 3 directors to board

Steinhoff International Holdings NV said Aug. 13 that it completed its financial restructuring as it continues to recover from the accounting scandal revealed at the South African home furnishings retailer in 2017.

The company said the completion of the restructuring has resulted in changes to its corporate holding structure and the appointment of three nominated directors to the boards of its Newco 3 entity and some other key intermediate holding companies. The three nominated directors are Helen Bouygues, Neil Brown and Paul Soldatos, who will join CEO Louis Du Preez and operational director Theodore de Klerk on the boards.

"Implementation of the restructuring is a major milestone on our recovery journey, bringing with it the stability that will allow us to turn the page and concentrate fully on maximizing value from our operating companies," Du Preez said in a statement.

The executive added that the group will continue to work on improving the performance of its operating segments, in addition to reducing its debt, resolving legal claims against the company and delivering shareholder value.

The company began the restructuring in 2018 by way of a company voluntary arrangement of its subsidiaries Steinhoff Finance Holding GmbH and Steinhoff Europe AG

As part of the restructuring, Steinhoff has sold a number of assets, including some Conforama Holding SA properties, a major stake in its auto retail unit Unitrans Motors (Proprietary) Ltd, its remaining stake in logistics, industrial and chemical company KAP Industrial Holdings Ltd., and its Kika/Leiner property holding companies, among others.

The restructuring also saw Steinhoff's specialty retailer Mattress Firm Holding Corp. file for bankruptcy in October 2018. It subsequently emerged from Chapter 11 after closing 660 stores.

Steinhoff in July started legal proceedings to recover compensation paid to its former CEO Markus Jooste and CFO Ben la Grange. It is seeking more than 870 million South African rand from Jooste and another 272 million rand from la Grange. The lawsuit follows an investigation by PricewaterhouseCoopers, which revealed that a small group of former executives and other non-Steinhoff executives, led by a senior management executive, were involved in the accounting irregularities.

In its Aug. 13 statement, the company said the lock-up agreement that it entered into in July 2018 with its creditors has automatically terminated on the implementation of the restructuring.

Steinhoff added that it will no longer release public monthly updates and will return to a normal cycle of market announcements and reporting, starting with a quarterly update for the three months to June 30 on or around Aug. 29. In July, Steinhoff reported a €356 million loss from continuing operations for its fiscal first half ended March 31, slimmer than its €392 million loss a year ago.

Later on Aug. 13, in its first presentation to investors since the accounting scandal erupted, Steinhoff said it is considering further divestments.

"We believe the only way for Steinhoff to survive is for it to become a pure investment holding company with a footprint predominantly focused on retail and retail-related assets," Du Preez said.

The restructuring involves a total of €9 billion of debt sitting in three holding companies, according to Leveraged Commentary and Data, or LCD, a unit of S&P Global. It will result in all debt being reissued, with no cash interest payment but semi-annual compounding PIK interest instead, and all instruments maturing in December 2021.

The SEAG holding company has debt totaling €5.79 billion, split into €2.05 billion New Lux Finco 2 first lien paying 7.875% PIK, and €3.74 billion New Lux Finco 2 second lien, paying 10.75% PIK.

The SFHG holding company has debt totaling €2.94 billion, split into €1.75 billion New Lux Finco 21/22 loan and €1.19 billion New Lux Finco 1 23 loan, both paying 10% PIK.

The Hemisphere entity holds a €360 million property portfolio, according to LCD.

In morning trading in Johannesburg on Aug. 14, Steinhoff's stock was trading 4.84% higher at 130 rand.

As of Aug. 13, US$1 was equivalent to 15.17 South African rand.