South African exchange investigates Steinhoff disclosures

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JOHANNESBURG (Reuters) – South African exchange operator JSE launched an investigation on Monday into whether Steinhoff broke disclosure rules, heaping pressure on the retailer as it tries to contain an accounting scandal.Shares in Steinhoff fell by 80 percent last week after the international retail group, whose brands include Poundland and Mattress Firm, disclosed “accounting irregularities” and parted ways with veteran chief executive Markus Jooste.

The JSE said in a statement it was investigating whether there had been any breaches of its listing requirements, adding this included “any breaches in relation to previous financial disclosures made to the public by Steinhoff International”.

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Steinhoff has a secondary listing on the bourse, which is also reviewing trading in its shares ahead of last week’s announcements, which included the company delaying its earnings report.

Two days before Steinhoff’s initial announcement, trading volumes in its shares jumped to between 27 and 32 million. This was the highest since Sept. 22 when the company said it expected a Dutch court to throw out a petition by its former joint venture partner to order a probe into the company’s accounts.
SHARE BOUNCE

Steinhoff’s shares rose by as much as 40 percent on Monday, regaining some ground after it called on its lenders to help.

It has also hired U.S. investment bank Moelis & Co and asked management consultancy AlixPartners “to assist on liquidity management and operational measures”.

“The group is asking for and requires continued support in relation to existing facilities from all its lenders to achieve an immediate stabilisation of the group’s financing,” it said.

The company has delayed its regular annual lenders’ meeting in London by a week to Dec. 19.

By 1313 GMT, the stock was up 38 percent at 8.30 in Johannesburg, recouping around $700 million of the $14 billion of shareholder value wiped off since last Wednesday.

Steinhoff has its main listing in Frankfurt where its shares rose by more than 13 percent.

There was some buying off a low base, but most investors were waiting for more information, Independent Securities trader Ryan Woods said.

“On the positive side, it does look like Christo Wiese is doing a salvage job,” Woods said of the retail group’s biggest shareholder and chairman, who is now at the helm.

Wiese and former chief executive Jooste were instrumental in turning Steinhoff from a modest distributor of furniture made in communist era eastern Europe to a global household goods juggernaut, vying for market share with the likes of IKEA.

Steinhoff has been on shopping spree since 2011 when it took over French furniture retailer Conforama. Last year’s string of acquisitions thrust it firmly on to investors’ radar screens.

Separately, Anglo-South African investment bank and asset manager Investec said its credit exposure to Steinhoff represented a small portion of its balance sheet.

Investec said it had derivative exposures linked to the Steinhoff share price, where a trading loss could materialise.

The loss maximum potential loss could be approximately 3 percent of the Investec group’s post-tax operating profit, although it could be as low as zero.

Reporting by Tiisetso Motsoeneng and TJ Strydom; Editing by Louise Heavens/Keith Weir/Alexander Smith

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