What Investors Want to Know as Steinhoff Stares Into the Abyss

Steinhoff Appoints Interim CEO Amid Accounting Scandal

Steinhoff International Holdings NV’s attempts to regain investor and creditor trust have fallen flat. More than two weeks after disclosing accounting irregularities, delaying its results and announcing the departure of its chief executive officer, the South African furniture and clothing retailer remains locked in a downward spiral.

A Dec. 19 meeting for lenders failed to halt a bond selloff and a slump in Steinhoff’s Frankfurt- and Johannesburg-listed shares, after management and advisers didn’t address some of the most pressing financial questions about the company, which owns Conforama in France, Mattress Firm in the U.S. and Poundland in the U.K.

With auditors PricewaterhouseCoopers still digging into Steinhoff’s accounts, here are some of the mysteries creditors and shareholders want answered.

How big is the problem?

The company hasn’t detailed the accounting irregularities, and it hasn’t provided a timeline for future disclosures. The magnitude of the irregularities is still under scrutiny, Richard Bussell of law firm Linklaters, who is advising the company, said in an audio recording posted on the retailer’s website. The company intends to restate its fiscal 2016 accounts, and could revise earlier statements, according to a presentation.

What’s the state of credit facilities?

Steinhoff didn’t provide details of available financing at the creditors’ meeting. It has said it’s seeing some lenders suspending or withdrawing support, as well as insurers cutting exposure. Still, the company won approval to roll over 690 million euros ($819 million) of financing due last week, Matthew Prest, a managing director at Moelis & Co. who has been working with Steinhoff for the past two weeks, said in the audio recording. The delay in the publication of 2017 numbers could force Steinhoff to ask lenders to waive a test on loan terms to maintain access to credit.

Where is the cash?

With credit facilities at risk, Steinhoff may need to rely on its cash buffer. Creditors and shareholders are in the dark over the size of the cash pile because the company hasn’t provided an update. Company accounts showed holdings of 3.1 billion euros at the end of March. Steinhoff also hasn’t said whether it will need new money to keep businesses running. Many units are dependent on the holding company for funding, according to Steinhoff’s presentation.

What about those 6 billion euros in assets?

Soon after announcing a delay in the publication of its audited results, Steinhoff told investors it was investigating “the validity and recoverability of certain non-South African assets of the company which amount to circa 6 billion euros.” Tuesday’s presentation provided no further clarity on the nature or status of those assets, or which subsidiaries they were related to.

Why did the CEO leave?

Steinhoff didn’t give a reason for Markus Jooste’s resignation, which was announced alongside the accounting irregularities. He was a protege of the company’s largest shareholder, Christo Wiese. On Thursday, Barclays Africa Group Ltd.’s Absa unit said a racehorse company linked to Jooste owed three South African financial services firms more than 1.2 billion rand ($94 million). Absa has moved to liquidate the company.

— With assistance by Renee Bonorchis, and Kenneth Pringle

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