America’s big banks face further losses from the Steinhoff accounting scandal, even after unveiling $1.1 billion in writedowns on its loan.
Steinhoff International shares were used as collateral for a loan in 2016. However, the retail group’s shares have plunged by 85 per cent since accounting irregularities emerged early last month. It is understood that some banks have sold Steinhoff shares at a loss, but several have retained substantial holdings.
The South African company owns retail brands across the world, including Poundland in Britain and Sleepy’s in America. It took out a €1.6 billion loan with a group of banks that was secured against 628 million shares owned by Christo Wiese, its former chairman, which were worth €3.2 billion at that time. They were worth only €320 million on Friday.
Steinhoff said on Thursday that it was in talks with banks about securing additional financing to meet “business-critical payments”. It added that “there can be no assurance that the company will be able to reach agreement on acceptable terms or at all”.
The 2016 loan was arranged by Goldman Sachs, Citigroup, HSBC and Nomura. Parts of it were then sold on to other banks.
Advertisement
Goldman said last week that it had taken a $130 million loss on a single structured loan to Steinhoff in the fourth quarter. JP Morgan reported fourth-quarter writedowns of $273 million linked to Steinhoff.
Last week Citi reported fourth-quarter losses of as much as $397 million linked to a “single client”, which sources said was Steinhoff. Bank of America reported $292 million of losses that are believed to have been caused by the loan.
Steinhoff lenders across the world are exposed to about €18 billion, according to the group’s latest figures, which were published in March.