South African retail giant Steinhoff has achieved a notable milestone in its efforts to resolve the accounting scandal that has haunted the company since 2017. The debt restructuring plan proposed by Steinhoff has received court approval from a Dutch court, signaling a step in the right direction for the embattled retailer. The District Court of Amsterdam confirmed the restructuring plan and rejected an application from a stakeholder who opposed the plan.

However, despite this positive development, Steinhoff’s shares experienced a significant drop on both the Frankfurt Stock Exchange and the Johannesburg bourse, plummeting by almost 60%. Shareholders are demonstrating their dissatisfaction with the plan, as they are set to benefit nothing from it. While the company’s three classes of creditors approved the restructuring plan last month, only a mere 10% of shareholders showed their support for the proposal.

Moving forward, Steinhoff and its subsidiaries will now proceed with implementing the WHOA Restructuring Plan, which is anticipated to conclude by June 30, 2023. This plan involves delisting the company and establishing a new unlisted holding structure.

This debt restructuring plan is expected to bring an end to a long and arduous saga that has led to substantial losses for shareholders, including former Chairman Christo Wiese, who is a prominent billionaire. Following the accounting scandal in 2017, Wiese and other shareholders suffered significant financial setbacks. However, Wiese agreed to a settlement that compensated him approximately 7 billion rand ($380 million) in cash and Pepkor shares, a much smaller amount compared to his initial losses.

Under the newly approved restructuring plan, shareholders will receive “contingent voting rights,” which grant them an economic stake in 20% of a newly-formed entity after the dissolution of the present company and delisting of its shares. Shareholders also have the option to convert this economic interest into monetary value if Steinhoff successfully repays its debts and generates profits in the future.

While Steinhoff’s debt restructuring plan has received court approval, it is evident that shareholders are dissatisfied with the outcome. The considerable decline in share prices reflects their discontent with a plan that fails to offer any financial benefits. As Steinhoff progresses with the implementation of the plan, it remains to be seen how the company will address the challenges ahead and regain the trust of its shareholders.

Useful links:
BBC – Steinhoff’s debt restructuring plan approved by Dutch court
Reuters – South Africa’s Steinhoff gets Dutch court approval for restructuring plan