Moody's downgrades Steinhoff deeper into junk on default fears

Moody's downgrades Steinhoff deeper into junk on default fears
By Mfuneko Toyana

JOHANNESBURG, Dec 28 (Reuters) - Ratings agency Moody's on Thursday downgraded Steinhoff's debt deeper into "junk" territory and warned further downgrades could follow due to mounting cash flow problems at the South African retail group.

The company, majority owned by tycoon Christo Wiese, is fighting for survival following its disclosure of accounting irregularities that has wiped more than $12 billion off its market value.

The owner of European and U.S. brands such as Mattress Firm, Conforama and Poundland told investors this month it was losing credit lines from lenders over the scandal that has seen veteran CEO Markus Jooste quit and the company come under scrutiny from local and overseas regulators.

Moody's, which had already downgraded Steinhoff's credit rating earlier this month, said in a statement the new rating reflected a "substantial risk" of default.

The agency cut its rating for Steinhoff International Holdings N.V. to Caa1, seven notches into junk.

"Steinhoff's CFR (Corporate Family Ratings) and Moody's review of its CFR for further downgrade reflect the increasing pressure on the company's liquidity profile," Moody's said.

"The situation has been compounded by its operating companies placing an additional liquidity burden on Steinhoff's centralized treasury function to fund their working capital needs."

Steinhoff has $2 billion of term loans maturing between 2018 and 2020, and the interest rate payable on the loans is expected to soar to around 250 to 280 basis points above the benchmark lending rate of European banks following the downgrades.

Steinhoff has been on shopping spree since 2011 when it took over French furniture retailer Conforama. Last year's string of acquisitions included Mattress Firm and Poundland, thrusting it firmly on to investors' radar screens.

The company has yet to explain in full what the "accounting irregularities" entail, but has said it is considering raising around 2 billion euros ($2.4 billion) from the sale of non-core assets and the proceeds of debt repayments from African unit Steinhoff Africa Retail.

($1 = 0.8383 euros) (Reporting by Mfuneko Toyana; Editing by Mark Potter)

2017-12-28 13:16:30

© 2018 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.
Most read today
Most read yesterday
Send e-mail to for any enquiries or see Contact Details for phone numbers
Home   •   Terms & conditions   •   PAIA   •   Privacy Policy   •   Security Notice   •   Contact Details
Market Statistics are calculated by Sharenet and are therefore not the official JSE Market Statistics. The calculation/derivation may include underlying JSE data.
© 2018 SHARENET (PTY) Ltd, Cape Town, South Africa