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Steinhoff meltdown keeps going

Jan 14 2018 06:00
Dewald van Rensburg, Lesetja Malope and Aldi Schoeman

Johannesburg - Regulators, legislators and shareholders are circling Steinhoff.

A potential shareholder class action suit has allegedly already recruited “a considerable number of investors by any measure”, including South Africans.

European Investors and Dutch Investors’ Association (VEB) are groups that pursue class actions against companies on behalf of allegedly wronged shareholders in return for 9% of whatever they win.

They have already signed up South African shareholders in addition to European ones, VEB spokesperson Armand Kersten told City Press.

He would not divulge the number of shareholders they represent or the size of their shareholdings.

“May it suffice, however, that it concerns a considerable number of investors by any measure,” he said.

“Ultimate proof of shareholdings has not, as yet, been validated. It is premature to have a settlement number in mind.

“VEB/European Investors strive for limitation of damages and the highest possible compensation for those having sustained investment losses,” Kersten added.

Dutch law requires that someone who wants to launch a class action first attempt to negotiate a settlement with the alleged culprit.

“Actions may take many years, although the Dutch legal system on class action has a proven track record for expediency, certainly in comparison with systems in other countries,” he said.

Steinhoff will soon face a combined inquiry by three parliamentary committees.

The chairperson of the standing committee on finance, Yunus Carrim, said he would meet his counterparts on the standing committee on public accounts (Themba Godi), and the public service and administration committee (Cassel Mathale) on Tuesday.

They would discuss who should be invited to the combined committee later this month.

Carrim emphasised that the committee would not take over the responsibilities of any statutory and regulatory bodies with jurisdiction on the matter.

He said he had written to the Financial Services Board (FSB), the SA Reserve Bank, the Public Investment Corporation, Government Employees’ Pension Fund, the Independent Regulatory Board for Auditors (IRBA) and the JSE to inform them about the pending hearings, and to ask them to provide the scope or terms of reference of the FSB investigation into Steinhoff, as well as possible timelines for the completion of the investigation.

The IRBA confirmed that Steinhoff’s deadline to respond to a letter it sent the company regarding the matter last month is Wednesday.

In addition, the IRBA announced it would launch an investigation into Deloitte SA’s auditing of Steinhoff.

Deloitte SA CEO Lwazi Bam said: “Deloitte received a letter from the IRBA dated December 14 2017 requesting a written response to allegations of improper conduct in relation to Steinhoff International Holdings.

"Deloitte is fully cooperating with the IRBA and will continue to fulfil its ethical, legal and regulatory obligations.”

Bam said the firm had not received any communication from any other regulatory body relating to the Steinhoff saga.

Bam said that, six days before receiving the IRBA’s letter, they sent the body a “reportable irregularity” letter about potential accounting irregularities at Steinhoff.

The retailer is not commenting at all outside formal announcements made on the news services of the two stock exchanges it is listed on – the JSE and the Frankfurt Stock Exchange.

Anything the company says is simply too price sensitive to communicate any other way, Steinhoff spokesperson Paul Trummer told City Press.

Rumours abound and real developments are coming to light at a dizzying rate.

Steinhoff announced on Thursday that it might prematurely redeem billions of rands in debt instruments issued by local subsidiary Steinhoff Services.

According to a December 19 presentation Steinhoff made to its bankers, these outstanding notes were worth R7.6bn – a small part of the group’s total debt.

According to this presentation, the group’s total outstanding debt was 10.7bn, or more than R150bn.

This comprised an array of loans and bonds across its European, South African and US subsidiaries. Most of it was European debt.

Unnamed analysts told Business Day that this move might be the prelude to Steinhoff selling yet more assets.

The group unconditionally guarantees the notes and the theory is that it might breach a condition of these guarantees if it sells certain assets without first redeeming the notes.

The central puzzle about Steinhoff at the moment is what its assets are worth.

In essence, Steinhoff disguised bad assets, largely consisting of customer credit, on a massive scale.

How and to what extent this was done is impossible to know.

In the absence of any real information from Steinhoff itself, the most detailed account of the shenanigans at the company is contained in a report produced by a mysterious company called Viceroy.

Viceroy is supposedly a three-man team of investor-investigators in New York who have remained anonymous and who produce research attacking corporate valuations.

They have sparked flurries of activity on the JSE by enigmatically announcing that they will soon publish a report on at least one more South African entity.

This has been blamed for otherwise inexplicable, short-term crashes in the JSE share prices of property companies and of pharmaceutical group Aspen.

Wiese now only barely a billionaire

The tremors from the Steinhoff quake have registered on the world’s most famous rich list, published by US business magazine Forbes.

Recently departed Steinhoff chair and major shareholder Christo Wiese has fallen almost to the bottom of the list of Africa’s dollar billionaires.

He lost roughly 80% of his wealth when the price of Steinhoff shares collapsed last month.

Forbes’ latest tally of rich Africans puts Wiese 21st out of 24 billionaires.

His fortune is now estimated at only $1.1bn.

In last year’s list, Forbes estimated Wiese’s wealth at $5.9bn. He was considered the sixth richest African at that point.

Wiese, alongside departed CEO Markus Jooste, has been the face of Steinhoff and its implosion.

He stepped down as chair on December 14 and has taken several personal hits.

Not only have his shares lost almost all of their value, he was also forced to sell 98.4 million Steinhoff shares when banks called them in as security.

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