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Steinhoff International Holdings, a South African-based global retail company linked to billionaire retail tycoon Christo Wiese, saw its market capitalization plummet by more than $270 million in less than a week after the retailer announced an agreement with its largest creditors to extend the maturity of its debt.
The announcement sent Steinhoff’s share price to a 52-week low, closing at R0.58 ($0.0333) per share. Steinhoff’s current market capitalization is R2.45 billion ($140.7 million), down from R7.2 billion ($412.4 million), making it the 196th most valuable company on the Johannesburg Stock Exchange.
The company’s board of directors believes that the agreement, which extends the maturity date of the company’s “group services debt” from June 30, 2023 to at least June 30, 2026, will provide it with a good platform for reducing debt and financing costs in the aftermath of a 2017 accounting scandal that resulted in approximately 90 separate legal claims against the company.
The proposed transaction terms are subject to final approvals and implementation, and the extension is not guaranteed to be completed. Steinhoff is, however, seeking the agreement’s terms to be supported by its financial creditors and shareholders.
If Steinhoff shareholders agree to the extension, they will retain 20 percent of the economic interest in the company’s post-closing equity. The agreement also includes refinancing or amendments and extensions to certain debt facilities, coverage increases for certain debt facilities, and the issuance of new debt facilities.
Wiese, Steinhoff’s largest shareholder in 2017, is a South African billionaire and retail tycoon who played a key role in the growth and expansion of Shoprite, Africa’s largest retailer, which has annual sales of over $9 billion and employs around 142,000 people across the continent.
Steinhoff has been experiencing financial difficulties since the 2017 accounting scandal, which resulted in the resignations of CEO Markus Jooste and Wiese. The company has been working to recover from the crisis and reduce debt, with CEO Louis du Preez spearheading efforts to rebuild it.
Steinhoff was granted permission by a South African high court in January to settle more than $8 billion in combined claims arising from the scandal and agreed to pay investors €1.43 billion ($1.62 billion) as part of the settlement offer in May.
However, shareholders who lost money when the company’s stock price dropped in 2017 will almost certainly have to wait for their settlement payouts.
