Steinhoff says four major investor groups back R17 billion settlement proposal
- Four major groups of plaintiffs have come out in favor of Steinhoff’s global settlement proposal for the litigation it faces due to the sharp drop in its stock price.
- The retailer says the four groups will now suspend their lawsuits against it and its former executives.
- Steinhoff offered 943 million euros (around R17 billion) to be split among all the claimants, which were split into two broad categories.
Four major groups of plaintiffs have lent their weight to Steinhoff’s comprehensive settlement proposal to settle litigation stemming from the sharp decline in its stock price, the retailer announced Wednesday.
In an update to shareholders, the Stellenbosch-headquartered conglomerate said Burford Capital, Deminor Recovery Services and DRRT/Therium would urge their constituents, which include South African investors, to support Steinhoff’s proposal.
“Any litigation initiated by these active plaintiff groups against Steinhoff and its former directors and officers will be immediately stayed,” he said.
In July last year, another major claimant group, European Investors-VEB, voiced support for the proposal.
Steinhoff faces more than 100 lawsuits in South Africa and Europe totaling more than R130 billion stemming from the precipitous drop in its share price at the end of 2017 when its CEO Markus Jooste abruptly resigned and an accounting scandal was revealed for the first time. The group’s shares have fallen more than 95% since Jooste’s resignation.
Last year, he offered a settlement to all his litigants to resolve all the claims he faces. It offered €943 million (around R17 billion) to be split among all the claimants, which were divided into contract claimants and market purchase claims.
The retailer said it could not afford to offer more to litigants and warned it could face liquidation if the settlement proposal is not accepted, due to a debt of around 10 billion euros.
The insurance groups underwriting liability cover for directors, as well as its former auditors, Deloitte, have both added 78 million euros each (R1.3 billion) to the proposal, subject to conditions.
The four groups are all market purchase seekers, meaning they can expect payouts of up to 10%* of their verified claims if the proposal goes ahead. Verified contract applicants can expect higher payout rates of between 18% and 29%.
Although the announcement of support from the four plaintiff groups was a victory for Steinhoff, not all of the litigants who lost in the stock price crash came out in favor of the deal.
Dublin-headquartered Hamilton, which is pursuing claims of 14 billion rand against Steinhoff, has taken legal action to try to stop the process, arguing that the terms of the proposed settlement are unfair. Steinhoff opposes the action and called Hamilton’s motion “unwarranted and premature.”
As Fin24 reported last week, Steinhoff’s BEE partner Lancaster 101 is suing the SA Reserve Bank for allegedly allowing Steinhoff to move assets worth 19 billion euros overseas while the group was technically insolvent – and allowing its local entities to settle claims of foreign investors “to the detriment of the South African economy”. The bank and Steinhoff say they will oppose Lancaster’s litigation.
The settlement does not need 100% of plaintiffs to vote yes for it to proceed, which means Steinhoff can afford some litigants to vote against at upcoming hearings in South Africa and the Netherlands.
* Update: This article has been updated to reflect that market purchase claimants can expect to receive payment of up to 10% of their verified claims when contributions from insurance groups underwriting liability coverage for directors and former auditors of Steinhoff, Deloitte, are added.