Steinhoff is bankrupt, insolvent, and a loss making company, and on top of that it will need in the near future to service it's huge debt at 10% interest rate instead of the previously 5%, so Stienhoff is expected to remain in the loss making, and the CVA dictates that Steinhoff needs the approval of the creditors should it want to sell any of its assets and that it cannot sell at less than the market price (and the creditors will be the ones to determine this price), so slowly Stienhoff will be sucked by the creditors as its debt grows and grows.
And on top of that the coming court cases and regulatory fines.
Steinhoff is uninvestable, and its share price worth (according to me and many others) is zero, the ones that buy it for more than zero are a high-risk takers or mis-informed.
Hi Tom,
I am uncertain if you appreciate the actual meaning of "bankrupt" or "insolvent".
For the record Steinhoff is neither bankrupt nor insolvent.
1. There has been no Court order compelling Steinhoff to settle a debt (which it has renegaded on). So no bankruptcy!!
2. Insolvent refers to the position when a company's liabilities exceed its assets. Have you looked through the Steinhoff financials in this regard? Let me assist you. As at the most recent Statement of Financial position (issued 29 June 2018 for 1H18) Total Assets is € 19838m with Total Liabilities € 16045m. So there is no insolvency by this definition.
The wider definition includes a position where a company is unable to pay it's debts. I am not aware of any non-financial creditor or lender making a demand for payment that was rebuffed or led to a Court Action. Therefore, this wider definition also does not apply.
I do not mean to trivialise how serious the Steinhoff financial situation is. I acknowledge of course that Steinhoff has engaged in a CVA. This is prudent. I have written before that very few if any companies on the JSE would have the capacity to settle their entire debt in one fell swoop. Please allow Steinhoff a similar fairness or leeway in your assessments.
You are technically correct that Steinhoff is a "loss making company". However, you seem to fail to appreciate that it was the capital related costs (impairments) that pushed Steinhoff into a technical loss. The company actually turned a relevantly healthy sustainable profit if you exclude these once off items.
Steinhoff's cashflows reflect the ability to sustain the extremely high 10% interest rate that you speak of. Incidentally, the true interest rate is significantly lower than this 10% (aside for the Hemisphere loan which is around this 10% rate).
You are correct regarding the contingent liability (Court cases and regulatory fines).
I can assure you that I am neither a "high-risk takers or mis-informed". If anything, I believe that I understand teh company far better than most, and I am able to make informed unemotional decisions backed up by solid tangible evidence.
But, I respect your right to a different opinion.
Best Regards
Captainfrom82