| STEINHOFF INVESTMENT HOLDINGS LIMITED - Update On Proposals To Extend Upcoming Maturities Of The Group Services Debt |
| 15 December 2022 8:05 |
Update On Proposals To Extend Upcoming Maturities Of The Group Services Debt
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: UPDATE ON PROPOSALS TO EXTEND UPCOMING MATURITIES OF THE GROUP
SERVICES DEBT
Steinhoff International Holdings N.V. is referred to as “SIHNV” or the “Company” and with its
subsidiaries, “Steinhoff” or the “Group”; “Group Services Debt” means the indebtedness
under (i) the Contingent Payment Undertakings (“CPUs”) entered into by SIHNV; and (ii) the
debt facilities entered into by Steenbok Lux Finco 1 S.à.r.l. (“LuxFinco 1”), Steenbok Lux Finco
2 S.à.r.l. (“LuxFinco 2”) and Hemisphere International Properties B.V. (“Hemisphere”) (the
instruments together, the “Group Services Debt Facilities”), each as amended from time to
time.
Introduction
Steinhoff is pleased to announce that it has entered into a framework support agreement
(“Support Agreement”) with its largest financial creditors (the “Original Participating
Lenders”) representing approximately 64% of the total Group Services Debt (excluding
intercompany holdings). The Board considers that the Support Agreement provides a stable
platform for Steinhoff to achieve the consents necessary to extend the maturity of the
Group Services Debt from the current maturity date of 30 June 2023 to at least 30 June 2026,
together with various related re-organisation steps and transactions (the “Maturity Extension
Transaction”).
If SIHNV shareholders agree to the Maturity Extension Transaction, they will retain 20% of the
economic interest in the post-closing equity of the Group, with the financial creditors being
entitled to receive the balance. If they do not agree, shareholders will no longer have any
interest in the Group.
Steinhoff now seeks the support of its financial creditors and shareholders for the terms of
the Maturity Extension Transaction, including long term maturity extensions across the Group
Services Debt. The Maturity Extension Transaction will maintain the stable platform for
continued value creation and monetisation of Steinhoff’s portfolio of assets.
THE SUMMARY BELOW SETS OUT A HIGH-LEVEL OVERVIEW OF THE SUPPORT AGREEMENT AND
THE TERMS OF THE MATURITY EXTENSION TRANSACTION. THE PROPOSED TERMS ARE SUBJECT
TO CONTRACT, FINAL APPROVALS AND IMPLEMENTATION. ACCORDINGLY, THERE IS NO
CERTAINTY THAT THE EXTENSION AND RELATED TERMS WILL BE CONCLUDED.
Overview of Key Terms of the proposed Maturity Extension Transaction
The Maturity Extension Transaction will result in:
• An extension of the maturity date under the Group Services Debt Facilities, associated
CPUs of the Company and intercompany loans to at least 30 June 2026, with two
twelve-month extension options available with majority lender consent under each of
the Group Services Debt Facilities (inter-conditional consents);
• The refinancing or amendment and extension of SEAG Facility A1 and SEAG Facility B1,
with SEAG Facility A2 lenders receiving the full benefit of the SEAG CPU thereafter. SEAG
A2 lenders will also benefit from a reclassification of existing Facility A2 into an instrument
which is fully covered by the SEAG CPU (sized at 87% of the existing SEAG Facility A2),
with the excess (13%) to be reclassified to SEAG Facility B2 or a new tranche fungible
with SEAG Facility B2 (which does not benefit from a CPU). This represents an increase
in CPU coverage for the SEAG Facility A2 lenders from 80.3% to 87%.
• Lenders with commitments in excess of EUR100m across the SFHG facilities, the SEAG
facilities and the Hemisphere facilities who become party to the Support Agreement on
or before 31 December 2022 (and who do not subsequently breach the terms of the
Support Agreement) benefiting from a ROFO and ROFR, on a pro rata basis, in respect
of the refinancing of SEAG Facility A1 and B1.
• A resetting of the SEAG Facility A2 coupon at 10.0% (compounding semi-annually) from
30 June 2023 from the current 10.75%. To ensure full CPU coverage for SEAG Facility A2
going forwards, the notional rate under the SEAG CPU will be aligned to grow at the
same rate.
• Amendments to the relevant debt documents of the Group resulting in CPU holders
being paid ahead of any holders of equity instruments issued by SIHNV.
• A “solvent distribution regime” to facilitate an efficient distribution of the Group’s assets
at fair value directly to financial creditors, subject to any legal and regulatory
restrictions, if debt has not been discharged in full at extended maturity (or following
any earlier acceleration). The regime includes limited recourse terms and “solvent
liquidation” provisions for the benefit of SIHNV (including any new ultimate parent of the
Group) and its subsidiaries.
The key economic terms are summarised below
Facility Current terms Proposed amendment
SEAG A1
Amount (per 30 June 2023) EUR693m Unchanged. Expected to be
refinanced prior to 30 June
2023
Maturity date (debt and CPU 30 June 2023, with a six-month Unchanged. Expected to be
maturity) extension option refinanced prior to 30 June
2023
Interest rate 7.875% PIK, semi-annual Unchanged. Expected to be
refinanced prior to 30 June
2023
Facility Current terms Proposed amendment
CPU and Recovery cap First ranking claim on SEAG Facility to be refinanced or
CPU amended, such that it no
5.0% PIK, semi-annual longer benefits from CPU
SEAG B1
Amount (per 30 June 2023) EUR29m (excl. intra-group) Unchanged. Expected to be
refinanced prior to 30 June
2023
Maturity date 30 June 2023, subject to a six- Unchanged. Expected to be
month extension option refinanced prior to 30 June
2023
Interest rate 7.875% PIK, semi-annual Unchanged. Expected to be
refinanced prior to 30 June
2023
SEAG A2
Amount (per 30 June 2023) EUR5,436m SEAG A2 lenders to benefit
from a resized EUR4,729m new
Facility A2 (87% of existing),
fully covered by SEAG CPU
EUR707m (13%) to be
reclassified to SEAG Facility B2
or a new tranche fungible with
SEAG Facility B2. Existing
Facility A2 lenders to hold
reclassified commitments pro
rata to existing. New terms of
SEAG B2 and the new tranche
summarised below
Maturity date (debt and CPU 30 June 2023, subject to a six- 30 June 2026, with two one-
maturity) month extension option year extension options
Interest rate 10.75% PIK, semi-annual 10.0% PIK, semi-annual
CPU Second ranking claim on Sole beneficiary of SEAG CPU
SEAG CPU behind SEAG A1
Recovery cap 5.0% PIK semi-annual, implying 10.0% PIK semi-annual,
80.3% coverage as of 30 June amount set at EUR4,729m as of
2023 30 June 2023 (aligned with
Facility A2 to provide full CPU
coverage going forwards)
SEAG B2
Amount (per 30 June 2023) EUR230m (excl. intra-group) EUR937m (excl. intra-group
and incl. EUR707m reclassified
from SEAG A2 and held by
SEAG A2 lenders pro rata)
Maturity date 30 June 2023, subject to a six- 30 June 2026, with two one-
month extension option year extension options
Interest rate 10.75% PIK, semi-annual 10.0% PIK, semi-annual
SFHG A1
Amount (per 30 June 2023) EUR2,537m Unchanged
Maturity date (debt and CPU 30 June 2023, subject to a six- 30 June 2026, with two one-
maturity) month extension option year extension options
Interest rate 10.0% PIK, semi-annual Unchanged
CPU Benefits from 21/22 CPU and Unchanged
S155 Settlement Note
Recovery cap 10.0% PIK, semi-annual Unchanged
SFHG A2
Amount (per 30 June 2023) EUR1,738m Unchanged
Maturity date (debt and CPU 30 June 2023, subject to a six- 30 June 2026, with two one-
maturity) month extension option year extension options
Interest rate 10.0% PIK, semi-annual Unchanged
Facility Current terms Proposed amendment
CPU Benefits from 23 CPU Unchanged
Recovery cap 10.0% PIK, semi-annual Unchanged
SFHG Super Senior
Amount (per 30 June 2023) EUR 57m Unchanged
Maturity date (debt and CPU 30 June 2023, subject to a six- 30 June 2026, with two one-
maturity) month extension option year extension options
Interest rate 10.0% PIK, semi-annual Unchanged
Overview of the Support Agreement
The Support Agreement provides the Group and its stakeholders with a period of stability
whilst the relevant consents are obtained, documents are negotiated, and arrangements
are put in place to implement the proposed Maturity Extension Transaction. The Support
Agreement has been signed by the Company, Steenbok Newco 3 Ltd (“Newco 3”) and
each of the Original Participating Lenders, representing approximately 64% of the Group
Services Debt (excluding intercompany holdings). Other Steinhoff Group entities and other
financial creditors may accede to the Support Agreement in due course.
Financial Creditor Accession and Early Bird Fee
For financial creditors, a copy of the Support Agreement is available on the relevant debt
domain set up for the facility in which the financial creditor holds a participation or from the
relevant facility agent, together with instructions on how to execute an accession letter to
accede to the Support Agreement. Any queries regarding the accession process should
be directed to directed to Houlihan Lokey (ProjectPurpleHL@hl.com).
Financial creditors who sign or accede to the Support Agreement by 5.00 p.m. London time
on 31 December 2022 (the “Early Bird Fee Deadline”), and who do not subsequently breach
the terms of the Support Agreement, will be eligible for an early bird fee (the “Early Bird
Fee”) equal to their pro-rata share of:
• in respect of SFHG A1 and A2 financial creditors, a fee payable by SFHG (LuxFinco 1) in
an amount equal to 0.50% of the total SFHG A1 and A2 debt; and
• in respect of the SEAG A2 and B2 financial creditors, a fee payable by SEAG (LuxFinco
2) in an amount equal to 0.50% of the total SEAG A2 and B2 debt.
Work Fee
Each of the Original Participating Lenders who remains signed up to the Support Agreement
and is not in breach of any of its terms, shall be paid a work fee (the “Work Fee”) equal to
their pro-rata share of:
• in respect of their SFHG A1 and A2 debt, a fee payable by SFHG (LuxFinco 1) in an
amount equal to 0.50% of the total SFHG A1 and A2 debt; and
• in respect of their SEAG A2 and B2 debt, a fee payable by SEAG (LuxFinco 2) in an
amount equal to 0.50% of the total SEAG A2 and B2 debt.
The Early Bird Fee and Work Fee are to be paid on a cashless basis, through the issuance of
commitments under new debt tranches in each of the SFHG and SEAG debt (as
applicable), on a super-senior basis, accruing interest at 10% PIK on a semi-annual basis
after 31 December 2022, with no CPU, maturing on 30 June 2026.
Overview of the timetable under the Support Agreement:
The Support Agreement seeks to secure the support of at least 80% of the financial creditors
under each Group Services Debt Facility.
The Support Agreement will provide the necessary stability to implement the Maturity
Extension Transaction by the “Long Stop Date” of 30 June 2023, subject to limited
termination events. If the Maturity Extension Transaction is not achieved by that date the
Long Stop Date can be extended:
• to a date up to 31 December 2023, by SIHNV, Newco 3 and a simple majority of CPU
creditors; or
• to a date beyond 31 December 2023, by SIHNV, Newco 3 and 80% of creditors under
each of the Group Services Debt Facilities.
Overview of Proposed Equity Re-organisation
In light of the assessment that the value of the Group’s assets continue to be less than its
liabilities and will remain so as at 30 June 2023, and subject to further due diligence and
structuring, the commercial terms of the Maturity Extension Transaction provide that the
individual CPU creditors will be entitled to receive equity in SIHNV (or any successor entity
or other entity replacing SIHNV as ultimate parent of the Group). The Maturity Extension
Transaction proposes that the financial creditors will be entitled, individually and
independently, to receive 100% of the voting rights and at least 80% of the economic
interest in the post-closing equity of the Group.
The remaining 20% of economic interests in the post-closing equity of the Group will be
issued to existing shareholders in the form of a new instrument ranking economically pari
passu with the equity instruments issued to the financial creditors, provided that the equity
re-organisation is approved by shareholders at a general meeting to be held in Q1 2023.
If the Maturity Extension Transaction proceeds, then in view of:
• the fact that the individual financial creditors will obtain independent voting rights and
(at least) 80% of the potential economic interest in the post-closing equity of the Group
as a condition to extending the maturity dates of the Group Services Debt; and
• the very material extent to which the equity interest currently is, and expected to
remain, out of the money,
the expectation is that on or following implementation of the Maturity Extension Transaction
the existing SIHNV shares, and their current listings, will fall away, with no financial
compensation payable to existing shareholders (except for the shareholders retaining the
20% economic interest in the post-closing equity of the Group if the equity re-organisation
is approved by shareholders at a general meeting as explained above). The ultimate
holding company of the restructured Group is anticipated to be an unlisted company.
The final terms of the implementation in relation to future equity structure remain to be
finalised.
If the equity restructuring referred to in the preceding paragraphs is not approved by the
shareholders at the general meeting, it is intended that 100% of the economic interests and
voting rights in the post-closing equity of the Group will be issued to the individual financial
creditors either through a Dutch restructuring process or, if that is not pursued or is not
achieved by 30 June 2023, as a result of the financial creditors becoming entitled to
implement the equity reorganisation by way of a share pledge enforcement alongside the
implementation of other terms of the Maturity Extension Transaction. In these
circumstances, SIHNV would lose its interests in the underlying Group businesses and assets
and shareholders would retain no economic interest in the restructured Group.
Overview of Considerations
As previously reported, Steinhoff currently has Group Services Debt totalling c. EUR10 billion
which has a maturity date of 30 June 2023.
The Group Services Debt is disclosed under Corporate and Treasury Services in note 10 of
SIHNV’s unaudited results for the six months ended 31 March 2022. The Group Services Debt
Facilities are held by a number of different financial creditors some of whom are invested
across a number of Group Services Debt Facilities.
Extending the maturity date of debt of this quantum and complexity would be an extremely
difficult and complex task in normal markets, however the nature of the agreements,
together with the developments during the year including those listed below, have made
this process even more challenging:
• There are complexities inherent in the nature of the Group Services Debt, including cross
defaults, inter-connectivity and multiple investors each with unique time horizons and
interests.
• The current global uncertainties have increased both risk aversion and interest rates.
• The market values of Steinhoff’s operating entities (ultimately the underlying security for
the Group Services Debt) have been under pressure broadly in line with the global
capital markets.
• By contrast, the significant liabilities under the Group Services Debt continue to accrue
interest at material levels.
Consequently, to date it has not been possible to de-lever the Group through investment
and asset disposals and/or refinancing as quickly as originally anticipated.
In order to maintain the financial stability and therefore avoid the consequences of the
Group Services Debt maturing on 30 June 2023, the proposed extension and related terms
addresses the total Group Services Debt and allows further time to fully realise the Group’s
investments and assets.
Next steps
Steinhoff contemplates that the next steps are as follows:
• Engagement with the Group’s financial creditors to seek further support for the
proposed terms and accessions by the financial creditors to the Support Agreement
before the Early Bird Deadline.
• Further development and finalisation of terms of the proposed extension and
agreement on long form documentation.
• Seeking the necessary financial creditor and regulatory approvals required, as well as
approval from the shareholders at a general meeting, and/or, if necessary, court
approvals in one or more relevant jurisdictions.
Steinhoff will work to implement the Maturity Extension Transaction on or before 30 June
2023.
Louis du Preez, Steinhoff Chief Executive Officer and Management Board Member, said:
“Taking into account the economic and other challenges currently facing the Group this is
ultimately a very good deal for the Group. The extension allows time for the Group to realise
the inherent value of its investments in a controlled manner. As such we are greatly
encouraged by the progress made so far and we urge all stakeholders to support the
finalisation and implementation of these proposals.”
Whilst the Group believes that the Support Agreement constitutes an important and positive
step towards the proposed extension of the Group Services Debt, there is no certainty that
the necessary commercial and legal agreements and arrangements will be concluded to
successfully implement the proposed transaction. Accordingly, shareholders and other
investors in the Company are advised to exercise caution when dealing in the securities of
the Group.
Further information and updates will be provided to the market as and when available.
The Company has a primary listing on the Frankfurt Stock Exchange and a secondary listing
on the JSE Limited.
Disclaimer
The information in this announcement is not intended to be complete. This announcement
is for information purposes only and does not constitute an offer, or any solicitation of any
offer, to buy or subscribe for any securities. The distribution of this announcement may, in
some countries, be restricted by law or regulation. Accordingly, persons who come into
possession of this document should inform themselves of and observe these restrictions. To
the fullest extent permitted by applicable law, Steinhoff disclaims any responsibility or
liability for the violation of any such restrictions by any person. Any failure to comply with
these restrictions may constitute a violation of the securities laws of that jurisdiction. Steinhoff
does not assume any responsibility for any violation of any of these restrictions. Any SIHNV
shareholder who is in any doubt as to his or her position should consult an appropriate
professional advisor without delay.
Certain statements in this announcement may be considered forward-looking statements.
These forward-looking statements speak only as of the date of this announcement. By their
nature, forward-looking statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the future, and
Steinhoff cannot guarantee the accuracy and completeness of forward-looking
statements. A number of important factors, not all of which are known to Steinhoff or are
within its control, could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statement. Steinhoff expressly disclaims any obligation or
undertaking to publicly update or revise any forward-looking statements, whether as a
result of new information, a change in expectations or for any other reason.
Stellenbosch, 15 December 2022
JSE Sponsor: PSG Capital
Date: 15-12-2022 08:05:00
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