Tekkie Town owners' long-awaited bid to have Steinhoff liquidated gets started

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Steinhoff is opposing a bid by the former owners of Tekkie Town to have it declared insolvent.
Steinhoff is opposing a bid by the former owners of Tekkie Town to have it declared insolvent.
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  • A court bid by the former owners of shoe retailer Tekkie Town to have retailer Steinhoff declared insolvent and liquidated has started in the Western Cape High Court. 
  • The Tekkie Town claimants say they were "duped" into swapping shares in their successful footwear business for shares in Steinhoff. 
  • On Wednesday, oral arguments were confined to who could take part in the court case.

The long-awaited bid by the one-time owners of shoe retailer Tekkie Town to have Steinhoff liquidated kicked off in the Western Cape High Court on Wednesday, with lawyers confining their arguments to who should be allowed to take part in the trial.

The former owners of the footwear chain have claimed they were "duped" into swapping their shares in the "highly profitable, cash-generative business" Tekkie Town for shares in Steinhoff.

The retailer's stock plunged precipitously in late 2017 when its CEO Markus Jooste resigned when the first signs of an accounting scandal came to light. On Wednesday morning, the conglomerate's shares were trading 90% lower than they were on the eve of Jooste's abrupt resignation.

In court papers, the Tekkie Town claimants have argued that the retailer is "factually and commercially insolvent" and should be wound up. Steinhoff, which is opposing the application, has argued that it is not commercially insolvent as it can pay its debts when they fall due.

Interventions 

On Wednesday, the opposing parties did not delve into the merits of the case, with presiding Judge Hayley Slingers rather hearing two separate intervention applications.

These were brought by a group saying it represents Steinhoff's financial creditors, and two administrators overseeing settlement proceedings taking place in the Netherlands.

Both intervening parties are opposing the liquidation application. Oral arguments will continue on Thursday, when Judge Slingers is expected to hear arguments about whether South Africa is the correct jurisdiction for the liquidation bid.

Slingers has said she will rule on the intervention applications and the question of jurisdiction on 6 September. The main proceedings will then start on 9 September.

Tekkie Town's former CEO, Bernard Mostert, previously told Fin24 that he and his fellow litigants want to have their business "restored", rather than receive a payout under Steinhoff's global settlement proposal.

Steinhoff's proposed payout to investors who lost out in its share price plunge now stands at €1.426 billion (around R25 billion).

But the former Tekkie Town owners have rejected the settlement, saying they stand to gain more if they can get their original business back, which they believe is possible if Steinhoff is wound up. 

The retailer, meanwhile, has urged claimants and creditors to support its proposal, saying the likely alternative -  liquidation - would be a bad outcome for all. Voting is set to commence on Friday.

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