Steinhoff accounting woes go back to 2016 as scandal grows

Steinhoff International Holdings revealed that its accounting errors stretch back into 2016, highlighting the extent of wrongdoing at the clothing and furniture retailer that’s led to an unprecedented stock slump over the last week.

Earnings for this year and last will have to be restated, the South African retail giant said in a statement late Wednesday, prompting the shares to slide anew. The issues relate to “the validity and recoverability of certain Steinhoff Europe balance-sheet assets,” it said.

The announcement comes days before Steinhoff is due to meet with banks to navigate a way out of its crisis, which has wiped more than 10-billion euros ($11.8-billion) off the value of the company. At stake is the future of a retailer with 130,000 employees and international brands including Mattress Firm in the US, Poundland in the U.K. and France’s Conforama. Markus Jooste has quit as chief executive officer, and Steinhoff appointed auditor PricewaterhouseCoopers to probe accounting irregularities.

The shares declined 8.8% to 8.94 rand as of 9:40 a.m. in Johannesburg, where Steinhoff has a secondary listing. The stock has slumped 80% in the South African city since the accounting crisis emerged on Dec. 5.

The Public Investment Corp, the second-largest shareholder with a 10% stake, on Wednesday questioned the independence of the board and said billionaire Chairman Christo Wiese may have a conflict of interest. Wiese, who has seen his wealth more than halve in a little more than a week, is running the company on an interim basis. The PIC manages government-worker pension funds.

Steinhoff is staring down the barrel of more than 9 billion euros of long-term debt. That includes a 2.5 billion euro term loan due in March 2018.

Loan Negotiations

Steinhoff has been seeking breathing room from its lenders amid the market rout. Wiese has been trying to negotiate a standstill agreement on a margin loan of 1.5-billion euros. And the company has gained the support of some key lenders for extra time to repay more than 1 billion euros owed on a revolving credit facility, Bloomberg News reported this week.

The accounting revelations led to a plunge in the company’s shares, erasing about three-quarters of their value. Steinhoff said last week that it was considering boosting liquidity by selling assets worth at least 1 billion euros, while investigating the recoverability of assets worth about 6-billion euros. The stock fell 11% on Wednesday in Frankfurt, where the company moved its primary listing from Johannesburg two years ago.

The disposals may include unloading its holding in South African financial services company PSG Group Ltd., according to Jannie Mouton, chairman of PSG and a former Steinhoff director. Steinhoff holds almost a quarter of PSG’s stock.

- Bloomberg