CAPE TOWN - Steinhoff International Holdings NV’s former Chief Executive Officer Markus Jooste has been thrown a lifeline by banks as the global retailer he oversaw for 18 years struggles to survive an accounting scandal that happened under his watch.
The 57-year-old’s personal investment company Mayfair Holdings Pty Ltd. has been given until the end of the year by lenders to sell as much as R2.08 billion ($167 million) in assets ranging from real estate to racehorses to repay almost R1.6 billion of defaulted loans, according to an agreement between Mayfair and its creditors seen by Bloomberg.
Creditors include two companies tied to Jooste and his son-in-law, Stefan Potgieter, which may realize more than R200 million from the disposals, the documents show. Mayfair will also be able to keep any proceeds left over after creditors are repaid, which could amount to about R500 million.
After Steinhoff shares crashed when the company reported a hole in its accounts in December, Mayfair defaulted on the loans and wasn’t able to immediately repay them. That gave banks including Sanlam Ltd.’s capital markets arm, Investec Plc and Absa, a banking unit of Barclays Africa Group Ltd., an option to liquidate the company or come up with a breakup proposal to release capital. The lenders agreed that the latter would realize more value. Mayfair owes the three banks a combined R959 million.
Steinhoff has distanced itself from the former CEO, who quit on Dec. 5, and have referred him to an anti-corruption police unit. The owner of Conforama in France and Mattress Firm in the U.S. has also started a probe into its finances that has so far uncovered the inflation of income and asset values over several years. The investigation is ongoing.
A so-called scheme of compromise “allowed a standstill until December 2018 to allow the Mayfair entities to sell assets in an orderly manner to benefit all creditors,” Absa said in an emailed response to questions, adding that all creditors backed the plan. A person who answered the phone at Mayfair’s Cape Town office said the company won’t comment. Jooste didn’t respond to a mobile-phone message seeking comment.
As well as the R200 million owed to companies linked to the ex-CEO and Potgieter, a further R420 million is owed to a company owned by Malcolm King, a property tycoon and one of Jooste’s friends, the scheme of arrangement shows. Potgieter is the sole director of Mayfair after Jooste quit in December. Neither Potgieter nor King immediately responded to emailed requests for comment.
“We continue to engage with the Steinhoff group of companies with respect to any monies owed by them to Investec,” said Ursula Nobrega, the lender’s head of investor relations. Sanlam reiterated in emailed comments that the creditors saw an orderly sale process as realising more value than a liquidation.
Jooste and Potgieter were hit with legal claims by Investec and Absa days after Steinhoff reported the accounting wrongdoing on Dec. 5. The banks contended that loans taken out by Mayfair and backed by Steinhoff stock -- including R93 million a week before the financial irregularities were reported -- were made while Jooste knew of the impending share collapse. Absa described the dealings as “naked fraud,” in the court papers. The clerk of the High Court in Cape Town said she wasn’t aware of any formal responses filed yet in the lawsuit.
The current management board led by acting CEO and former Chief Operating Officer Danie Van Der Merwe didn’t know about the accounting malpractice even though they were working in senior positions at the company, according to Chairwoman Heather Sonn, who said Friday all had pledged to quit if they are found to have engaged in any wrongdoing.
Steinhoff shares declined 0.3 percent to 0.15 euros as of 10:18 a.m. in Frankfurt, where the company moved its primary listing from Johannesburg in 2015.