Steinhoff - Less is faster

All,

Please find our updated analysis of Steinhoff here.

This agreement has come sooner than we thought, but it also is not as comprehensive. The formalisation of the equity situation, including a generous offer to the current shareholders of 20%, does not address the leverage situation at SFHG or SEAG. But that is perhaps the best solution for everyone. The agreement is good for SEAG A2s, because it gets to take over the A1’s CPU at Nv. It is good for the SFHG creditors because it allows for asset value to grow them into the money after the SEAG A2s and it’s good for the shareholders if they can salvage some 20% of the company - whatever the dilution in the future.  

Positioning:

- We continue to hold our 5% position in the SEAG A2s - which will now be split across 87c of stub SEAG A2s and 13c of SEAG B2s, which do not benefit from the CPU at NV. However, we are gaining full coverage of the 87c piece under the CPU, because taking over the full SEAG CPU raises our IPA Cap and the notional is aligned from here and thus covered through June 2026 (sounds technical?).

- Pepco and Pepkor are doing very well in this environment. And while we have less recent information from Mattressfirm and Greenlit Brands, we think asset valuation overall has strong potential to put us in a better position in three years’ time. 

- The economics remain equity-like, with the prospect of some 20% dilution from a strike price well above where we are today.

What happens now:

- The SEAG A1 and B1 are being refinanced and in the process will give up their claim to the CPU from NV.

- The SEAG A2s will take over the full CPU and the uncovered portion will be converted into B2 - without CPU. PIK will reduce to 10% to match the growth of the CPU from here. This swap of CPU from A1-A2 had been in preparation for some time and is clearly negative for the SFHG creditors, but to them is preferable to creditors crystallising their respective positions today.

- All facilities extend to June 2026 for a minor fee of 0.5% if they agree before Dec 31st. The ad-hoc group receives another 0.5% for their efforts.

- Shareholders have the option to agree to a substitution of NV for an unlisted entity in which they would receive 20% of the equity. Failing agreement, the creditors are threatening a Dutch process or share pledge enforcement, in each case leaving shareholders behind. 

2026:

- Until 2026 the full debt stack will remain outstanding and PIKing.

- Extension options for 2026 are much more limited than they are now for 2023 and the documentation will foresee a solvent liquidation in 2026 (or before), which could still leave shareholders with a doughnut. 

Happy to discuss,

Wolfgang

E: wfelix@sarria.co.uk
T: +44 203 744 7003
www.sarria.co.uk