STEINHOFF INTERNATIONAL HOLDINGS N.V. - Update On Progress Of Financial Restructuring
17 August 2018 16:20
SNH SHFF 201808170038A
Update On Progress Of Financial Restructuring

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


Steinhoff Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1954/001893/06)
JSE Code: SHFF
ISIN: ZAE000068367
(“Steinhoff Investments”)

UPDATE ON PROGRESS OF FINANCIAL RESTRUCTURING
Steinhoff International Holdings N.V. (the “Company” and with its subsidiaries, the “Group”)

INTRODUCTION

In accordance with the Company’s reporting obligations under paragraph (e) of clause 20 of
the lock-up agreement between the Company, Steinhoff Europe AG (“SEAG”), Steinhoff
Finance Holding GmbH (“SFH”) and Stripes US Holding Incorporated (“SUSHI”) and certain
creditors dated 11 July 2018 (the “LUA”), please see below the first monthly update on progress
in connection with the corporate and capital restructuring of the Group’s European business
(the “Restructuring”).

In summary, work in connection with the implementation of the Restructuring is progressing
well and the Group currently anticipates launching the various steps required for
implementation of the Restructuring within the period falling 3 months from the effective date
of the LUA, in accordance with its terms.

Update on creditor support

As of 17 August 2018, 92.12% of the financial creditors of SEAG, 90.87% of the financial creditors
of SUSHI and 97.17% of the financial creditors of SFH have acceded to the LUA. Creditors of
SEAG, SUSHI and SFH who are not already party to the LUA may still accede and become party
to the LUA in respect of all financial indebtedness of SEAG, SUSHI and/or SFH to which they are
beneficially entitled by following the instructions set out on the website hosted by Lucid Issuer
Services Limited (“Lucid”) in its capacity as calculation agent under the LUA
(https://www.lucid-is.com/STEINHOFF/). Creditors who accede to the LUA remain eligible to
receive the Lock-Up Fee notwithstanding the LUA became effective on 20 July 2018. For the
avoidance of doubt, creditors who accede to the LUA following the Lock-Up Early Bird Fee
Deadline are not eligible to receive the Lock-Up Early Bird Fee. Lucid, as calculation agent
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under the LUA, is keeping track of any trading of Locked-Up Debt and will be calculating the
Lock-Up Fee to which eligible creditors are entitled to receive at close of the Restructuring.

For the purposes of this announcement, capitalized terms “Lock-Up Early Bird Fee”, “Lock-Up
Early Bird Fee Deadline”, “Lock-Up Fee” and “Locked-Up Debt” are each as defined in the
announcement dated 11 July 2018.

SEAG and SFH relocate business and management activities to the UK

The Company announced on 3 August 2018 that SEAG and SFH will each relocate their
principal place of business from Austria to the United Kingdom and set up a permanent
establishment in the United Kingdom. Consequently, from 3 August 2018, for each of SEAG and
SFH:

      i.   the principal place of business and address for all its notices and communications;
     ii.   the management and principal place of administration; and
    iii.   the head office,

are the same as the head office of the Steinhoff UK Group which is located at: 5th Floor Festival
House, Jessop Avenue, Cheltenham, Gloucestershire, GL50 3SH, United Kingdom. The relevant
finance parties under the respective finance documents of SEAG and SFH have been notified
of the change of address for all correspondence going forward for each of SEAG and SFH.

Restructuring of Hemisphere International Properties B.V.

Further to the Company’s announcement of 6 August 2018, the negotiations with the
Hemisphere Lenders (as defined in the announcement on 6 August 2018) in connection with
the restructuring of Hemisphere International Properties B.V., are progressing well and the
Company anticipates providing a further update in the coming days.

Implementation of the Restructuring

The Company, SFH and SEAG are working closely with the various creditor advisers to prepare
the necessary financing documents and security documentation to reflect the commercial
terms agreed under the LUA and to progress all other preparatory steps necessary for the
timely implementation of the Restructuring as set out in the steps plan attached at Schedule
12 of the LUA. The Company, SFH, SEAG and certain of their creditors (together with their
respective advisers) have attended various meetings in London with a view to preparing such
documents and progressing those steps as well as to identify opportunities to rationalise the
Group’s European structure and implement the various corporate governance changes also
required under the terms of the LUA.

In view of the current levels of creditor support for the LUA, the Group’s current intention is to
implement the Restructuring through a combination of: (i) a consent solicitation process in
relation to the Convertible Bonds issued by SFH; (ii) the English legal procedure of a company
voluntary arrangement (CVA) in respect of the SEAG debt; and (iii) an English scheme of
arrangement in respect of the SUSHI debt. The Group is currently working towards the launch
of any CVA and/or scheme of arrangement which may be necessary for the purposes of
implementation of the Restructuring within the period falling 3 months from the effective date
of the LUA.

Should sufficient consent levels be achieved from the SEAG and/or SUSHI creditors, the Group
will implement the Restructuring by making use of the pre-existing contractual amendment
provisions of the relevant financing arrangements (thereby avoiding the expense and
complication of a CVA and/or scheme of arrangement).

The Group is receiving advice on tax matters given the complex international nature of its
corporate structure and the transactions set out in the LUA.

OTHER BUSINESS MATTERS

Liquidity

The Company continues to actively monitor cash flows and manage other liabilities (including
contingent claims, tax and bilateral facilities) as well as funding needs that may arise at the
subsidiary level. Liquidity has been further strengthened by the recent sales processes
contemplated as part of the broader rationalisation of the European business, which provides
flexibility to support the operating businesses where appropriate. The South African business
remains self-funding whilst the Pepkor Europe (including Poundland) business continues to
benefit from strong levels of liquidity.

Imminent refinancing initiatives - Steinhoff Asia Pacific (APAC)

To facilitate the continuing growth of the APAC business, Steinhoff Asia Pacific Group Holdings
Pty Ltd is currently negotiating the terms of a new multi-year secured AUD200,000,000 –
250,000,000 senior debt facility with local banks on normal commercial terms for the purposes
of refinancing its existing working capital facilities (the “APAC Working Capital Refinancing”).
In conjunction with the negotiations in relation to the APAC Working Capital Refinancing, the
Group is also revisiting the terms and security package granted in respect of certain intra-
group receivables owed by entities in the APAC cluster to entities in the SEAG cluster (together
with the APAC Working Capital Refinancing, the “APAC Refinancing”). The APAC Refinancing
may result in the release of certain guarantee claims held by its existing creditors against the
Company and may include the grant of additional security over certain assets of the APAC
business for the benefit of the refinancing parties.

The APAC Refinancing is likely to require the consent of the Majority Participants (as defined in
the LUA) to ensure compliance with Schedule 13 (Undertakings) of the LUA and the Group will
share further details on the key terms of the APAC Refinancing with creditors of SEAG, SFH and
SUSHI for their approval in due course.

UPDATE ON GOVERNANCE

Following recent changes to the governance regime, the current board members of SEAG
are: (i) supervisory board – Louis du Preez (chairman), Richard Heis (deputy chairman) and
Philip Dieperink; and (ii) management board – Theodore de Klerk and David Frauman. The
board members of SFH are: Louis du Preez and David Frauman. In addition, as per the
announcement by the Company on 15 August 2018, Paul Copley has been nominated as an
appointee to the supervisory board of the Company with the appointment expected to take
effect at the next general meeting.

The governance working group (the “GWG”) described under the terms of the LUA has also
now been constituted and comprises of The Baupost Group, L.L.C., Centerbridge Partners, L.P.,
Davidson Kempner European Partners, LLP, KKR Credit Advisors (US) LLC, Silver Point Capital,
L.P. and York Capital Management LLC. The GWG is also consulting with the Company
Nominations Committee (as defined in the LUA) with a view to finalizing the membership of the
litigation committee referred to under the terms of the LUA which shall comprise of a
representative from the management board of the Company (Louis du Preez) together with
two representatives from the Company’s supervisory board (including deputy chair, Peter
Wakkie) and the new appointee to the board of Steinhoff International Holdings Proprietary
Limited (“SIHPL”) (once confirmed).

As set out in the terms of the LUA, no member of the GWG has any liability, responsibility of
duty of care to the Participants (as defined in the LUA) in relation to the role, obligations and
rights afforded to the GWG under the LUA.

REPORTING AND PUBLIC CREDITOR DAY

The Company is proposing to host a financial creditors’ meeting (which will be open to public
side creditors and private side creditors) in London in the coming weeks with attendance by
key members of the operating companies’ management. We anticipate that materials
prepared in connection with this meeting will be made available on the Company’s website
immediately beforehand and in lieu of a monthly report for September.

CURRENT MANAGEMENT PRIORITIES

The key priorities for the management team currently include:

•   Progressing the Restructuring on the terms set out in the LUA, including determining the
    method of implementation, drafting the finance documentation and concluding on the
    tax position;

•   Managing the ongoing operations of the Group, including actively monitoring cash flows,
    supporting operating performance, managing other liabilities (see above) and funding
    needs that arise at the operating company level;

•   Assisting PwC with the ongoing investigation into accounting irregularities together with
    other work required to progress and finalize the restatement of accounts;

•   Monitoring and defending any litigation claims brought against the Group and actively
    pursuing recoveries where available; and

•   Reviewing opportunities to rationalise the Group’s structure and preparing the
    implementation of corporate governance changes as per the LUA terms.

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, 17 August 2018




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