The former owners of retail footwear and apparel company Tekkie Town have lobbed a grenade into Steinhoff’s complex plans to settle a swathe of multi-billion euro claims.
In a move that poses a major threat to Steinhoff’s financial creditors and the contractual claimants, former Tekkie Town owners – including founder Braam van Huyssteen and former CEO Bernard Mostert – have filed an urgent application in the Western Cape High Court to have Steinhoff liquidated.
In their application the former owners say that the global settlement proposed by Steinhoff offers them no “meaningful benefits” compared with the likely outcome of a liquidation.
Better off under liquidation
According to the settlement terms proposed by Steinhoff, Van Huyssteen and Mostert who are deemed ‘contractual claimants’ stand to recoup between 4.2% and 5.8% of their claim. By contrast a liquidation could be expected to generate a return of between 4.6% and 7.6%.
The court papers dismiss suggestions that a liquidation of Steinhoff would create uncertainty over the employment prospects of its tens of thousands of employees across the globe.
“The employees in the Steinhoff group are employed by the subsidiaries which are sustainable business.
They suggest that the number of employees might not be much more than three – namely CEO Louis du Preez, CFO Theo de Klerk and company secretary Sarah Radema.
Third category of claimants
While much has been made of the discrepancy in the settlement figures proposed for market purchase claimants versus ‘contractual claimants’ such as the former Tekkie Town owners, former chair Christo Wiese, GT Ferreira and the Du Toit trust, the liquidation application highlights the very favourable position enjoyed by a third category of claimants, the ‘financial creditors’.
Many of these creditors bought up old debt at a discounted rate from Steinhoff’s original creditors after reports of “financial irregularities” triggered a collapse in the group’s share price in December 2017.
In terms of the agreement reached with these financial creditors, who have two representatives on the litigation committee, Steinhoff will repay them the full face value of their debt.
“Accordingly, they will be receiving substantial returns on their investment,” said Tekkie Town’s former owners.
The generous payment to the financial creditors partly reflects the extremely strong bargaining position they held. A liquidation would fundamentally threaten that arrangement.
Steinhoff resolves to fight, again
In a Sens statement released hours after the court application was made on Wednesday Steinhoff said it will vigorously defend any attempt to disrupt the proposed global settlement.
It also gave notice that it will likely fight the action on jurisdictional grounds, stating that the “proper forum” for any action relating to the proposed global settlement was the Dutch courts.
In its brief Sens statement Steinhoff said: “The global settlement proposal currently under consideration by the Dutch court incorporates provisions to address the disputed claims of the Tekkie Town claimants against the company.”
“It is a chimera created to enable a group of South African companies and individuals to export financial assets from South Africa to the perceived safer waters of the Frankfurt Stock Exchange and, notionally, to provide the respondent with means to access European financial markets.”
In their application the former Tekkie Town owners say they were fraudulently induced to sell their business to Steinhoff in 2016.
They state that the accounts on which that transaction was based were declared to have complied with all applicable accounting and financial reporting standards.
In addition Steinhoff’s former CEO Markus Jooste had stated that he knew of no facts or circumstances which, if they became known, might have a material adverse effect on the publicly traded price of the ordinary shares in Steinhoff.
The former owners sold their 59% stake in Tekkie Town in exchange for shares worth R1.85 billion at the time and agreed not to sell those shares for three years.
This story first appeared on Moneyweb and has been republished with permission.