Founder: Turnaround Talk
With some of the biggest companies on the continent, South Africa has a long-held tradition of producing some of the world’s biggest, most innovative and profitable companies. This came crashing down in 2017 as the Steinhoff can of worms was opened.
Exposing an accounting saga that has caused many to question the controls that regulators have in place to monitor ethical behaviour, the Steinhoff issue left many South Africans feeling uneasy about the company as well as its behaviour as it was once considered a good investment and featured heavily in many retirement portfolios.
Stienhoff’s former CEO, Markus Jooste, was eventually charged and faced heavy sanctions from the JSE. What became of the company is still being played out, with creditors now approving an ambitious debt restructuring plan.
A key point
The Moneyweb article pointed out that the creditors of South Africa’s Steinhoff International approved the retailer’s debt restructuring plan, it said on Monday (29 May, 2023), paving the way for it to approach a Dutch court to give the scheme the go-ahead.
Steinhoff shares on the Frankfurt Stock Exchange jumped almost 5% in early trade and almost 8% higher on the Johannesburg bourse on the news.
The article adds that the scandal-hit company, where financial mismanagement by some of its top executives in 2017 turned out to be the biggest accounting scandal in South Africa, had proposed a restructuring plan earlier this year to avoid bankruptcy.
It had said that with its liabilities far exceeding its assets, it would not be able to pay its 10.4 billion euro (R220 billion or $11.15 billion) external debt when it comes up for maturity by the end of June.
Image By: News24
Next steps
“As a next step, Steinhoff will consider if it intends to request the Court to confirm the WHOA Restructuring Plan,” it said in a statement, adding it will publish a voting report on Wednesday to be submitted to the court for approval.
The Moneyweb article pointed out that all of its three class of creditors – conditional payment undertaking (CPU), secured and unsecured – voted in favour of the restructuring plan which will see the parent company delisted and a new unlisted holding structure created after court approval, it said.
Only a tenth of its shareholders, however, approved the plan.
The article points out that the owner of South African retailer Pepkor and Europe’s Pepco had earlier said that it would go ahead with the restructuring if at least two-thirds of its CPU shareholders approve the scheme, provided the Court approves.
Under the restructuring plan, shareholders would be given rights to 20% of a new entity. This interest can be converted into money if the company manages to pay off its debt and make a profit in future.
Explosive outcome
We cannot let this happen again. Perhaps it does take an explosion like Steinhoff to illustrate that South Africa does indeed need more controls and regulatory reform to ensure that accounting standards are stricter, and that non-compliance is unacceptable.
However, it is welcome news that this issue is finally being addressed and that the company is taking its first steps towards stability and possible profitability. Whether the company regains its former glory remains to be seen.
