Steinhoff International is facing challenges in restructuring its €10 billion (R168bn) corporate debt, a situation worsened by the current global economic uncertainties that have driven up interest rates and contributed to fears of an economic downturn.
The company’s debt is owed to various investor classes that have differing rights and obligations, executives at Steinhoff said yesterday, in a trading update for the nine-month period to the end of June.
“The group has corporate debt totalling about €10bn. The debt is split into a number of different classes, each with different rights and obligations, and each class is held by a number of different investors – predominantly investors that focus on distressed credit,” said chief executive Louis du Preez.
“The current global uncertainties have made the credit markets even more challenging than usual. Notwithstanding these macroeconomic and other challenges, we are actively engaging with the various lender groups, with the assistance of various market experts.”
Steinhoff is, however, witnessing the emergence of a larger discount market in its markets as regional and international markets recover from Covid-19 restrictions, and related economic slowdown.
Its retail units are positioned to explore these opportunities although “significant trading and other uncertainties persist”. This has somewhat dimmed the “outlook for the group” in the face of likely volatility, given the supply chain disruptions from Russia’s invasion of Ukraine.
Despite this, Steinhoff raised revenues by 12 percent during the nine-month period under review to €7.7bn. In the South African market, some areas experienced extreme weather disturbances, especially in Durban.
This resulted in Pepkor Holdings’s Durban distribution centre suffering severe flood damage, with supply chain operations adversely affected. Subsequent recovery work had, however, been completed.
Other headwinds impacting Steinhoff’s South African operations included a highly inflationary environment as well as rising interest rates that were “putting both consumers and businesses under additional pressure”.
In spite of this, Pepkor opened 227 new stores and expanded its retail footprint to 5 772 stores, a strategy that reflects the group’s organic growth thrust.
“Plans remain on track to open more than 300 new stores in the current financial year. The performance of Avenida, Pepkor Holdings’s recent acquisition in Brazil, is particularly pleasing and has exceeded expectations,” said the company.
The European-focused Pepco division also raised revenues by 18 percent to €3.58bn. With Pepco contributing 26 percent to growth. New store openings under the segment continued during the period across all brands, with 350 new stores added so far this year.
The European discount market has picked up, with growth surpassing levels recorded during the previous financial crisis. For Steinhoff, this means that “a much larger customer base is more familiar with and more frequently shops” across this channel.
BUSINESS REPORT