German Investors’ Legal Showdown: SdK vs. Steinhoff’s Restructuring Plan

A prominent group of German investors, the Schutzgemeinschaft der Kapitalanleger (SdK), has announced its intent to challenge Steinhoff’s recently proposed […]

Steinhoff
  1. The Schutzgemeinschaft der Kapitalanleger (SdK), a major group of German investors, plans to challenge Steinhoff’s proposed debt restructuring plan in court, claiming it unfairly disadvantages shareholders.
  2. The controversial plan involves delisting Steinhoff shares and offering creditors contingent value rights (CVRs) in exchange for a three-year debt repayment holiday, leaving shareholders with no equity.
  3. SdK asserts that the restructuring plan undervalues Steinhoff’s assets, which would result in creditors receiving more than they are entitled to based on their claims. The group also criticizes the lack of transparency in Steinhoff’s communication with shareholders.

A prominent group of German investors, the Schutzgemeinschaft der Kapitalanleger (SdK), has announced its intent to challenge Steinhoff’s recently proposed debt restructuring plan in court. The investor group, which also represents South African shareholders, maintains that it has amassed the necessary funds to finance the legal battle. SdK is a private organization that champions shareholder rights and interests in Germany and other countries.

SdK board member Marc Liebscher stated, “SdK is convinced that it can build up considerable pressure on [Steinhoff’s] board of directors.” He added that the organization’s shareholders have contributed to a legal fund that can be used to cover court costs and legal fees for disputes across multiple jurisdictions.

The investor group vehemently opposes the plan first suggested by Steinhoff in December, which entails delisting its shares and providing financial creditors with contingent value rights (CVRs) in exchange for a three-year debt repayment holiday. The furniture retailer has admitted its inability to settle its €10.2 billion (approximately R199 billion) debt burden before the due date of June 30. To avert a “messy” liquidation, Steinhoff argues that a deal with financial creditors is the only viable option.

At last week’s annual general meeting, Steinhoff CEO Louis du Preez cautioned shareholders about the potential for an “inefficient and disorderly” liquidation process if an agreement is not reached. Despite his assurances that the deal is the best possible option, six out of 10 shareholders voted against it. Consequently, the retailer announced its intention to seek approval for a similar proposal from a Dutch court.

The newly proposed plan would leave Steinhoff shareholders without any equity in the group after delisting, and they would not receive payment for the shares they own. In exchange for a three-year extension on debt repayment, financial creditors would acquire 100% of the group’s equity. Steinhoff would also delist from the Frankfurt exchange and the JSE. Instead of publicly traded shares, creditors would receive contingent value rights equal to 100% of Steinhoff’s equity.

Liebscher told News24 that SdK plans to argue in court that the restructuring plan is unjust, as it “wrongly assumes” a Steinhoff valuation that is too low. As a result, creditors would obtain assets with a higher value than they are entitled to based on their claims. He emphasized that, according to SdK’s assessment, the assets designated for creditors are worth significantly more than the sum of the creditors’ total claims.

SdK also alleges that Steinhoff delayed informing shareholders about the potential restructure and that the process was “completely non-transparent.” In addition to contesting the restructuring plan in court, Liebscher stated that SdK intends to launch a separate inquiry to expose any misconduct by the board, specifically concerning the communication and negotiation of the restructuring plans in 2022.

Furthermore, the SdK aims to pursue potential shareholder claims against Steinhoff’s management and supervisory boards in Germany for “late ad hoc notices of creditors’ refusal to further postpone the maturity of their claim in German courts.” Liebscher explained that because Steinhoff is listed in Germany, breaches of ad hoc notification obligations can be tried in German courts.