CAPE TOWN - Bank of America Corp. just joined a roster of big U.S. lenders suffering multimillion-dollar burns on their dealings linked to Steinhoff International Holdings NV.
Fourth-quarter earnings were crimped by a R3.5 billion “single-name non-U.S. commercial charge-off,” the Charlotte, North Carolina-based company said Wednesday in a statement announcing results. The costs were incurred in two divisions: global markets and global banking.
The company got stung providing a margin loan that used Steinhoff’s stock as collateral, according to a person briefed on the matter who asked not to be identified discussing client business. Shares of the embattled South African retailer lost about 90% of their value last month after it announced Dec. 5 that it had uncovered accounting irregularities.
BofA has examined “the credit that we have to this borrower and we feel very comfortable at this point that we’ve taken the appropriate charge-off,” Chief Financial Officer Paul Donofrio told reporters on a conference call to discuss fourth-quarter results, declining to name the borrower. Donofrio added that the bank is “well reserved for what might come in the future.”
Banks and other creditors had almost $22 billion of exposure to Steinhoff at the end of March. The company, criticized for being opaque about its finances, owns retail chains around the globe -- including Conforama in France, Poundland in the U.K. and Mattress Firm in the U.S., which encompasses stores formerly known as Sleepy’s.