Steinhoff subsidiary files for bankruptcy protection in the US

Steinhoff announced on Friday afternoon that its US subsidiary Mattress Firm was filing for Chapter 11 bankruptcy.

In a statement to shareholders, Steinhoff [JSE:SNH] said the US's largest mattress dealership was filing for voluntary Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware.

According to the US Courts website, chapter 11 bankruptcy is often referred to as "reorganisation" bankruptcy. Protection under the Bankruptcy Code provides for reorganisation, allowing a debtor to propose a plan to keep their business going while they pay creditors over time. 

Steinhoff CEO Danie van der Merwe said: "Mattress Firm has been facing significant operational challenges which management is
addressing through its turnaround plan. Considering the Group’s current position, we believe the Mattress Firm recapitalisation is the best way to support and accelerate the turnaround plan, so as to ensure a future for Mattress Firm and its employees and unlock value for shareholders over time.

"The Mattress Firm recapitalisation also represents a further positive step in the wider Steinhoff restructuring process."

In a separate statement, Mattress Firm - which has about 3 300 stores - said it anticipated that deliveries would be made as scheduled. "The Company intends that warranties, guarantees and other customer programs will be honored as usual," it said.

In added it had filed motions seeking authority to reject up to 700 leases. "An initial group of approximately 200 stores are expected to be closed in the next few days. Decisions about additional store closings will be made in the next few weeks," it added. 

Steinhoff bought Mattress Firm in August 2016 for R33bn. At the time then-Steinhoff CEO Markus Jooste - who abruptly resigned in December 2017 amid a still-ongoing accounting scandal - said the acquisition would allow Steinhoff to enter the US market and expand its global reach. 

Steinhoff shares have plunged by over 95% since Jooste resigned and it announced it would have to restate its annual financial filings. It is currently the subject of an independent forensic audit by PwC. 

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