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Steinhoff thrown lifeline by South African lenders

Ashley Armstrong
Steinhoff owns Poundland in the UK - REUTERS

Scandal-hit Steinhoff has been thrown a lifeline by its South African lenders, who have backed a move to prop up its troubled European retail operations with its healthier domestic operations as it scrambles to shore up its balance sheet.

Steinhoff has been in crunch talks with lenders after unearthing a €6bn hole in its accounts which has wiped 90pc of the value from the company, sparking comparisons with the implosion of Enron almost two decades ago.

The South African retail conglomerate, which owns Poundland, Harveys and Bensons for Beds in the UK, said that it had sought support for €200m of liquidity and the first €60m installment will be received by the end of this week. Steinhoff said that the funds would be available to meet “business critical payments during the next phase of the group’s stabilisation plan”.

Earlier this month Poundland announced that it had secured a €180m loan from US investment firm Davidson Kempner to press on with the roll-out of its discount fashion chain Pep&Co inside its stores. 

The company said that it had been in talks with “several potential funders” to provide extra financing, although to date “external liquidity has not been obtained in the time available, given the complexity of the group structure and the terms of the existing financings”.

Steinhoff analysis

Steinhoff also revealed that it would be asking creditors to waive some payments under its existing borrowing arrangements for its European business to maintain stability. Steinhoff said that, while it was confident of receiving sufficient support from its finance providers and lenders, “there can be no assurance that the company will be able to reach agreement with its finance providers on acceptable terms or at all”.

Steinhoff reiterated that investors were “advised to exercise caution when dealing in the securities of the group”.

To reassure shareholders, Steinhoff said that it expects to be able to pay cash interest on all its existing debt and that it planned to refinance some or all of its debt whilst selling assets to provide additional liquidity.

Earlier this week, US banks Citigroup, Bank of America, JP Morgan and Goldman Sachs revealed that they had lost more than $1bn in total on their exposure to Steinhoff.