STEINHOFF INTERNATIONAL HOLDINGS N.V. - Process And Liquidity Update And Waiver Proposals To Certain Financial Creditors
18 January 2018 15:40
SNH 201801180065A
Process And Liquidity Update And Waiver Proposals To Certain Financial Creditors

Steinhoff International Holdings N.V.
(Incorporated in the Netherlands)
(Registration number: 63570173)
Share Code: SNH
ISIN: NL0011375019

Steinhoff – Process and liquidity update and waiver proposals to certain financial creditors
Steinhoff International Holdings N.V. (the “Company” and with its subsidiaries, the “Group”)

Process and liquidity update
The Company announced on 5 December 2017 that its Supervisory Board (the “Supervisory
Board”) had appointed PwC to investigate certain accounting irregularities that had come to
light and that the publication of the Company’s consolidated financial statements for the year
ending 30 September 2017 (“2017 Consolidated Accounts”) would be postponed.

Since the Company’s announcement on 5 December 2017:
•   The Group appointed Moelis & Company ("Moelis") and AlixPartners as independent
    financial advisor and operational advisor, respectively. Moelis continues to support and
    advise the Group on its debt financing and its discussions with lenders, while AlixPartners
    continues to assist with the Group’s liquidity management and operational measures.
•   The uncertainty relating to the accounting irregularities and unavailability of audited
    financial statements led to liquidity issues for the Group. As a result, the Company has been
    engaged with lenders, bondholders, other financial creditors and its key credit insurers to
    ensure that sufficient liquidity has been maintained for the Group’s underlying operations
    and to seek additional liquidity funding for the central treasury functions of the Group and
    the various operating businesses.

The Company has acted on a number of fronts in order to stabilise the Group’s operations and
the main developments since 5 December 2017 are summarised below.

    1. Governance changes
    Several steps have been taken to strengthen the governance of the Company. On 8
    December 2017, it was announced that the Supervisory Board had established a sub-
    committee of three independent non-executive directors (Heather Sonn, Johan van Zyl
    and Dr Steve Booysen) to provide a regular interface with the senior management team.
    On 14 December 2017, the Company further announced that Heather Sonn had been
    appointed as the acting Chair of the Supervisory Board. Following recent changes, the
    Management Board of the Company now comprises: Danie van der Merwe (acting Chief
    Executive Officer) and, pending formal appointment at the general meeting of the
    Company, Philip Dieperink (Group Chief Financial Officer and continuing Chief Financial
    Officer of the Steinhoff UK sub-group, a position held since September 2007), Alexandre
    Nodale (deputy Chief Executive Officer and continuing Chief Executive Officer of the
    Conforama business) and Louis du Preez, who joined the Group in June 2017 as Group
    Legal Counsel after more than 20 years in private practice (Commercial Director).
    On 4 January 2018, the Company also announced that it is looking to appoint an external
    independent Chief Restructuring Officer and steps to secure this appointment are
    underway. The Supervisory Board continues to keep the governance of the Group under
    review and a number of candidates are in the process of being approached to
    strengthen the independence of the Supervisory Board.
    2. Accounting investigation

The Company’s announcement on 5 December 2017 included reference to the fact that
PwC had been engaged to perform an independent investigation into those matters that
had been raised by Deloitte in relation to the 2017 Consolidated Accounts. PwC has been
working with the Company and its legal advisers in relation to the accounting irregularities
and the necessary preliminary steps in relation to their investigation have been taken. The
Supervisory Board has instructed that the scope of the investigation is not limited in any
way, so as to allow those investigations full access to the Group. The Group aims to provide
an update on progress with the accounting enquiries as soon as it is able to do so.

3. Engagement with financial creditors
Members of the Management Board of the Company and representatives of the key
business units met with representatives of the Group's European banks and credit insurers
in London on 19 December 2017. The related presentation and recording was made
available on the Company’s website on 19 December 2017. That meeting was followed
by a separate meeting with the Group’s lenders in South Africa on 21 December 2017 and
more recently, on 10 January 2018. In those meetings, the Company was able to reiterate
the strength of the financial position and trading performance of the businesses and
investments in South Africa and the trading performance and opportunities in the
businesses outside South Africa. At those meetings, the Company emphasised the priority
of achieving stability across the Group’s operating companies and the continuation of
the European central office functions. It was confirmed that there was a need in the short
term to obtain liquidity for the central functions within Europe. The Group has provided
notice to certain of its European-based financial creditors of a meeting to be held in
London on 26 January 2018.

4. Local financing updates and liquidity measures
On 22 December 2017, the Mattress Firm business in the United States announced that it
had succeeded in obtaining a new US$75 million asset backed financing for its business
which includes the option to upsize the financing up to US$225 million, subject to certain
On 4 January 2018, it was reported that the Pepkor Europe (which includes Poundland UK)
and Steinhoff UK sub-groups had entered into a credit facility of up to £180 million to
finance its working capital and operational requirements.

The Australian business announced in its trading update on 28 December 2017 that it is an
independent, profitable and financially strong business delivering positive cash flows with
its own banking facilities and is not dependent on working capital support from the

In relation to the Conforama sub-group, Conforama is currently exploring options for its
own financing should such a requirement arise. Conforama also reached an agreement
on 11 January 2018 to sell its 17% stake in Showroomprivé for approximately €79 million
(subject to regulatory consent), a transaction which will raise further liquidity for the

South Africa
As noted above, at the South African lenders’ meetings on 21 December 2017 and 10
January 2018, the Company and its advisers were able to reiterate the positive financial
position and trading performance of the businesses and investments in South Africa.

Central Europe
    At a central European level, AlixPartners continues to work with senior management to
    assist with liquidity and cash management requirements to support the European business
    units and assets. Philip Dieperink, as new Group Chief Financial Officer, and the
    management team are working closely with AlixPartners in respect of the cash
    management analysis being undertaken, and on the practical implementation of
    identified cash management measures. The foregoing measures, when combined with a
    small number of non-core asset sales, have resulted in liquidity being maintained across
    the Group during this period.
   5. European financing
    The Company has obtained the support of its lenders in South Africa for interim liquidity
    support for the Group’s European operations from the Group’s subsidiaries in South Africa.
    Based on current projected near-term liquidity requirements in Europe, the Company is
    seeking support in the amount of €200 million. The first installment of €60 million will be
    received in the week ending 19 January 2018 (for which the Company has obtained the
    approval of the Group’s lenders in South Africa and the necessary regulatory consent).
    The Company is seeking the necessary approvals and consent for further installments of
    the balance. It is expected that any funds so received will be available to meet business
    critical payments during the next phase of the Group's stabilisation plan.
    The Company has also been in recent discussions with several potential funders to provide
    liquidity facilities to the Group, including those who are existing creditors and/or investors
    in the Group. To date, additional external liquidity has not been obtained in the time
    available given the complexity of the Group structure and the terms of the existing
    financings, although additional external liquidity may be required in the future.

Timing of trading update
In prior years, the Group has reported on the trading performance of its underlying businesses
for the quarter ending 31 December in the last week of February. The Group expects to keep
to that timetable this year, when it will report on the trading performance of the Group’s
business units.
Debt service
The Group currently expects to be in a position to pay cash interest on all its existing financial
indebtedness at the ordinary contractual rate over the near term forecasted period.
Way forward
The Company’s objective of achieving stability within the Group and, more specifically, its
financing arrangements, is being sought by the implementation of the following measures:
•   maintaining trading performance of the individual business units;
•   detailed cash management actions and liquidity support for the Group; and
•   a commitment to resolve, as soon as possible, the uncertainties around any accounting

In the coming months, the Group expects to undertake the following measures to put in place
further stabilisation measures and a de-leveraging plan, namely:
•   a refinancing and redemption of some or all of the financial indebtedness within South
    Africa. It is anticipated that this will have the effect of releasing additional funds which will
    be used to provide any additional necessary liquidity for the remainder of the Group. The
    Company aims to complete this process as soon as practicable with the support of its
    lenders in South Africa;
•   the realisation of a limited number of assets to support additional liquidity for the Group as
    required, together with any external financings if needed; and
•   development of a plan to address the Group’s financial indebtedness.
Waiver proposals to be made to certain financial creditors
The Company has received support from its financial creditors in recent weeks in its efforts to
maintain stability. To further build on those recent measures and to achieve a continuation of
the Group, protection of its valuable trading assets and development of a plan to address its
financial indebtedness, the Group will shortly be recommending that certain of its financial
creditors support the Group by providing limited waivers under certain of the Group’s existing
European financing arrangements. It is important to note that the waivers will not be proposed
in respect of: (i) the new and any subsequent financings of the Mattress Firm business; (ii) the
recent financings of the Pepkor Europe (which includes Poundland UK) and Steinhoff UK sub-
groups (and any subsequent financings for those sub-groups); (iii) the financing arrangements
of the South African businesses of the Group; (iv) the financing arrangements of the Australian
businesses of the Group; or (v) the local financings of the Conforama sub-group.
The Group will be seeking responses to its proposals for the above-mentioned waivers in the
coming weeks and will provide an update in due course. While the Company is confident that
it will receive sufficient support from its relevant finance providers to obtain these limited
waivers (once proposed), there can be no assurance that the Company will be able to reach
agreement with its finance providers on acceptable terms or at all.
Shareholders and other investors in the Company are advised to exercise caution when
dealing in the securities of the Group.

JSE Sponsor: PSG Capital
Stellenbosch, 18 January 2018

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