Steinhoff insurers offer R1.3 billion to investors who lost out in share price plunge

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  • Steinhoff says insurance groups underwriting its liability cover for current and former top executives have offered up to €78 million (R1.3 billion) to help settle claims against it.
  • This would be in addition to the €943 million (roughly R17 billion) offered by Steinhoff itself, and another R1.3 billion from its former auditor Deloitte. 
  • Steinhoff says its former CEO Markus Jooste and three others would not be covered by the offer, and has maintained the right to sue them in "claw back" proceedings. 

Steinhoff says it has reached a deal with certain insurance companies underwriting the group's directors and officers (D&O) insurance polices to contribute up to €78 million (R1.3 billion) to help settle claims against it.

D&O Insurance is a type of liability cover for top executives.

The announcement comes roughly a month after the Stellenbosch-headquartered retailer said that it had clinched a deal with its former auditor Deloitte who agreed to pay contribute a similar amount in compensation to claimants.

Under the proposal, the underwriters will make €55.5 million available to pay out to market purchase claimants (MPCs) – those who bought shares on the open market, and €15 million for distribution to certain contractual claimants. Steinhoff reports its financials in euros because it is domiciled in the Netherlands. 

The D&O and Deloitte offers of compensation are both contingent on claimants voting to move forward with Steinhoff's "global settlement proposal" to settle claims arising from the precipitous drop in its share price in late 2017. Neither group will admit any liability. 

Steinhoff itself has proposed paying out €943 million (roughly R17 billion) in total to settle all the claims it is facing, again without accepting any liability. 

If the settlement proposal gets the green light from shareholders in two court cases in the Netherlands and South Africa, the D&O and Deloitte offers will be added to the settlement "bucket" - meaning claimants will get higher pay out.  

A flood of litigation

Steinhoff is facing around 100 separate lawsuits stemming from its share price plunge and the accounting scandal it uncovered. In total, the claims amount to over R130 billion, which the group says it will not be able to pay out.

Under the group's settlement proposal which it announced last year and has been given the go-ahead by creditors, each "class" of Steinhoff investor would get a certain percentage of verified claims paid out.

Market purchase claimants will get around 5.5% of their verified claims paid out, although this will tick up if the Deloitte and D&O offers work out. The payout for contractual claimants is up to 29%.

Steinhoff said on Tuesday that four of its former executives are not covered by the D&O proposal, including its former CEO Markus Jooste, its former CFO Ben La Grange, Steinhoff’s former company secretary Stéhan Grobler, and the group's ex-Steinhoff Europe director Siegmar Schmidt.

The retailer said it maintains the right to institute or continue legal claims against the four. 

Meanwhile, as the retailer continues to make its case to claimants to accept a settlement, the former chairperson of its JSE-listed subsidiary, Pepkor, has initiated legal action against the SA Reserve Bank for allegedly enabling Steinhoff to move assets worth €19 billion overseas while the group was technically insolvent – and allowing its local entities to settle claims by foreign investors "to the detriment of the South African economy".

As Fin24 reporter earlier, both the Reserve Bank and Steinhoff have indicated they will oppose the litigation by Lancaster 101 and its chairperson Jayendra Naidoo.

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