by Henning Lindhoff
Since December 2017, no other share from the MDax has been in the same focus of investors as that of the furniture group Steinhoff. And with good reason. The investors have lost 91 percent since the holding company's balance sheet scandal in December 2017 became public.
And many a German employee is also concerned about developments, as the Poco furniture store is one of the Group's portfolio with German roots.
These date back to 1964, when the German entrepreneur Bruno Steinhoff founded the company in Westerstede (Lower Saxony) as Bruno Steinhoff Möbelvertretungen und -vertrieb. He quickly specialized in importing furniture from the former Eastern Bloc. After the fall of the Berlin Wall, Steinhoff bought some East German suppliers and invested heavily in production at Eastern European locations.
As Steinhoff International Holdings Ltd., the Group completed its restructuring in 1998 and issued shares for the first time - on the stock exchange in Johannesburg, South Africa. Since then Steinhoff has grown internationally. In the meantime, the company was considered the second largest European furniture retailer after Ikea.
The deep case a few weeks ago: Due to irregularities in several financial statements, CEO Markus Jooste was forced to resign immediately on 5 December. As a result, the Steinhoff share lost 60 percent of its price and fell even further to a price of 35 euro cents. Major shareholder and Chairman of the Supervisory Board Christo Wiese took over the helm for a short time. Supervisory Board members Heather Sonn and Danie van der Merwe followed in quick succession.
Now it's a matter of sheer existence. The new management is urgently looking for new capital to maintain ongoing operations.
With Conforama, a Steinhoff subsidiary has already been able to find new lenders: The French company concluded a three-year financing agreement with Tikehau Capita. The volume amounts to 115 million euros.
In addition, the Group has divested itself in particular of shares in the PSG Group valued at EUR 480 million. In addition, the sale of a stake in the French Internet portal Showroom Prive for 75 million euros. Finally, the restructuring of the Austrian division was agreed in talks with creditors in London on 26 January.
An investigation of the Steinhoff accounts by Pricewaterhouse Coopers is still in progress. An update is expected for the last week of February.
Not only shareholders are affected by the continuing difficult business situation. The owners of the company's bonds are also concerned.
Until recently, the European Central Bank was one of them. By the end of 2017, it still had a bond issued by Steinhoff's European subsidiary with maturity in 2025 and an interest rate of 1.875 percent on its books.
The Steinhoff crisis thus also has a monetary policy dimension.
As part of its bond purchase programme, the ECB has invested a total of 132 billion euros since March 2016, relying exclusively on the ratings of the major rating agencies. Steinhoff also received an investment grade rating from these agencies.
As a result of the massive purchasing program, the creditworthiness of Steinhoff and other recommended bond issuers was massively increased by the rating agencies. The year 2017 promptly became a record year for the European bond market.
In 2018, the European Central Bank intends to increase the volume of this support programme to EUR 200 billion. On January 10, analysts at Bank of America Merrill Lynch Global Research warned against excessive pressure from buyers. If the ECB continues to be so dominant,"the market simply won't be able to issue enough bonds to satisfy the weight of demand, also caused by the central bank".
The bond bubble could burst quickly in this current scenario, as "even less creditworthy bond issuers are not analysed critically enough by buyers".