US and European banks, some of which are due to meet with Steinhoff International Holdings on December 19, are among creditors with billions in exposure to the global retailer whose asset value has plummeted amid an accounting scandal.

Total exposure to lenders and other creditors was almost €18bn ($21bn) as of the end of March. Long-term liabilities were €12.1bn and short-term liabilities €5.87bn, its first-half earnings statement shows. Those are the most recent Steinhoff results available after it indefinitely postponed publishing full-year financials on Wednesday.

“The great unknown is the funding of the off-balance-sheet structures, which could spill over into fresh bank liability,” Adrian Saville, CEO of Cannon Asset Managers in Johannesburg, said on Friday. The short-term debt could “fall over if the business fails”.

Steinhoff, listed in Frankfurt and Johannesburg, has lost more than 80% of its market value in the three days since the company started a probe into accounting irregularities and CEO Markus Jooste resigned. In SA, Steinhoff has relationships with Standard Bank Group, Investec and a unit of FirstRand. Globally some of the lenders include Citigroup, Bank of America, HSBC Holdings and BNP Paribas.

Banker meeting

Steinhoff had scheduled a meeting with lenders on December 11, but said on Friday that it had been postponed by eight days. The purpose of the event was to discuss the full-year financial statements that haven’t yet been published. The company didn’t say whether it planned to report earnings before December 19.

The meeting is with banks involved in a €2.9bn revolving credit facility and a $4bn syndicated financing facility for the acquisition of US brand Mattress Firm, according to three sources familiar with the matter.

Steinhoff representatives didn’t respond to requests for comment on the meeting or the amount of debt.

Banks also have exposure to Steinhoff through loans provided to chairperson Christo Wiese’s investment vehicles. Last year, the billionaire and largest shareholder of the company pledged 628-million of Steinhoff’s shares in collateral to borrow money from Citigroup, HSBC, Goldman Sachs Group and Nomura Holdings. That was to participate in a share sale in conjunction with the acquisition of Mattress Firm and Poundland, according to a company statement.

It’s unclear whether Wiese has repaid part of those loans since. The value of all shares pledged as collateral is now €365m, down from €2.2bn a month ago.

Citigroup, Goldman and Nomura declined to comment on the Wiese loans, and HSBC didn’t immediately respond to a request for comment. Investec didn’t respond to a request for comment on the debt. Standard Bank, Citigroup, BNP, Bank of America and HSBC declined to comment.

FirstRand unit Rand Merchant Bank “has banking relationships with Steinhoff and with entities owned by” Wiese, it said in an e-mailed response to questions. “We have reviewed our credit exposures to these entities and believe they are adequately secured,” it said, declining to give further details because of client confidentiality.

Steinhoff, which owns home-furnishings chain Conforama in France, said on Thursday that it was considering boosting liquidity by selling assets worth at least €1bn. It also said one of its African subsidiaries would refinance long-term liabilities amounting to another €1bn, while the possibility of recovering assets for about €6bn was being investigated. All these measures may help recoup some of the money owing to banks and investors.

“Banks usually will also go for three times interest cover, so as long as the underlying cash flows remain stable they can withstand a sharp pull-back,” said Patrice Rassou, the head of equities at Sanlam Investment Management in Cape Town. “As long as the banks have the underlying business as security, with the cash flows, and not the share as security, then the risk is reduced.”

Steinhoff shares traded 11% lower at €0.529 as of 2.45pm in Frankfurt, extending the three-day decline to 82%.

•Text courtesy of Bloomberg.

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