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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
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
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
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
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)
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