Steinhoff shares continued to drop as it announced on Tuesday that it planned to initiate a Dutch law restructuring plan which might see its shareholders lose their shares.
The group shares fell by a massive 22% on Wednesday morning trade. The shares have dropped by 85.41% in the past six months.
In a statement released on Tuesday, the group said that the launch of the restructuring plan followed the rejection of the proposal to approve the maturity extension transaction and related equity reorganisation by the company’s shareholders at the company’s annual general meeting held on Wednesday, March 22.
In 2017 the company made headlines for accounting fraud in what was said to be South Africa’s biggest corporate fraud, with its executives facing criminal charges.
And despite strenuous efforts by a new executive team to keep the troubled retailer as a going concern, at Steinhoff’s annual general meeting shareholders voted against the debt-restructuring deal.
Steinhoff needed shareholder support to back a deal to give creditors 80% of its equity, leaving existing shareholders with only 20% of the equity value. This is because the retailer owes its creditors €10 billion (about R200bn), due in June, that it now cannot pay.
Steinhoff owns 44.5% of Pepkor and 75% of European discount retailer Pepco and stakes in US Mattress Firm and Greenlit brands, an Australian furniture seller. The group’s debts exceed its assets by €3.5bn.
The restructuring plan which Steinhoff plans to enter has many resemblances to the restructuring plan that shareholders rejected last week.
It said the Maturity Extension Transaction will, among other things, result in the following amendments.
“An extension of the maturity date under the Group Services Debt Facilities, of the company, and inter-company loans to at least June 30, 2026, with two 12-month extension options available with majority lender consent under each of the Group Services Debt Facilities,” it said.
The group is also still proposing to delist from the Frankfurt and Johannesburg Stock exchanges.
The group said that if the restructuring plan was not successful or was not confirmed by the Dutch court by June 30, the company may be in default under the relevant finance documentation and certain elements of the Maturity Extension Transaction including the equity reorganisation may be implemented by way of enforcement of security rights by the financial creditors alongside the implementation of other terms of the Maturity Extension Transaction.
"In these circumstances, Steinhoff would lose its interests in the underlying group businesses and assets and shareholders would retain no economic interest in the restructured group,“ it said.
The group said the maturity extension transaction, including the equity reorganisation, is subject to new financial creditor consent and confirmation by the Dutch court.
“There is no certainty that such consents or confirmation order will be achieved before the current maturity date under the group services debt of June 30, following which the financial creditors may enforce their rights,” the group said.
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