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Pepkor, SA’s largest non-food retailer, has met all debt-related obligations of its executives who borrowed money to buy Steinhoff shares before news of the departure of former Steinhoff International CEO Markus Jooste collapsed. Steinhoff’s share price, along with collateral from the banks involved. in the deal.
The admission that Pepkor advanced a bridge line of credit equivalent to R519m to Business Venture Investments No. 1499 (BVI) to settle a loan granted by Rand Merchant Bank (RMB), a division of FirstRand Bank, was made in the accompanying notes to Steinhoff Investment Holdings’ financial statement released Friday.
Steinhoff Investment Holdings is a wholly owned subsidiary of Steinhoff International Holdings, listed in Frankfurt and JSE. It indirectly owns a 68% stake in Pepkor Holdings, which owns and operates well-known retail brands such as Pep, Ackermans and Bradlows.
BVI shareholders comprise a number of current and former Pepkor executives, and Business Day understands that includes Pepkor CEO Leon Lourens, who traded Pepkor shares for Steinhoff when the latter acquired the former in 2015 in what was one of the largest corporate transactions in the country. .
In addition to exchanging shares, the executives borrowed money to increase their stake in the global furniture retailer, and the shares served as collateral for an advance loan in RMB.
Following news of Jooste’s sudden departure and disclosures of accounting irregularities at Steinhoff in December 2017, the stock price collapsed in the days and weeks that followed, losing approximately 95% of its value over the course of that month.
This meant that the collateral for the BVI loan dropped precipitously and the emergence of Steinhoff’s true financial position meant that it was unable to pay dividends, a vital source of cash flow for many Pepkor executives who used it to pay off the loan.
While all of Steinhoff’s other shareholders saw the value of their investment collapse, Pepkor issued a controversial guarantee on behalf of BVI to the lenders, effectively promising to fulfill any obligations the company and its shareholders had to the banks, something that has already been done. done.
Many commenters questioned whether the guarantee was issued at arm’s length and whether there was sufficient disclosure. The company has yet to specify how it intends to reimburse.
The financial statement notes read: “Pepkor Holdings is in the process of negotiating the issue of preferred shares from BVI to Pepkor Holdings to replace the bridge credit facility advanced during the year. This allowed BVI to pay off its debt with RMB. ”
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