Freedom at stake as nervous banks hold beauty parade

Freedom Furniture owner Steinhoff International Holdings will soon have its Australian retail interests under the close watch of an insolvency firm after lenders NAB and ANZ launched a beauty parade last week to appoint an adviser.

It comes as private equity groups are said to be fielding approaches about buying Steinhoff’s most iconic Australian brands, including Freedom Furniture, Fantastic Furniture and Best & Less.

The situation indicates that the fallout surrounding the investigation by German authorities into the Frankfurt and Johannesburg-listed Steinhoff is taking its toll on the retail empire.

Lenders are growing worried with the shares having plunged 85 per cent since news of the scandal emerged in recent months, with $US12bn already wiped from the value of what is one of South Africa’s largest companies and $US7bn worth of its assets under scrutiny, The Wall Street Journal has reported.

The company, founded by Bruno Steinhoff, now has a market cap of about $US2.7bn.

Australia’s top four banks are keeping a watch on the retail space in the build up to Christmas.

Dataroom for Wednesday on Fantastic Furniture

Myer this month issued a profit warning and others such as Specialty Fashion Group are facing pressure from digital disrupters and industry globalisation, while Retail Food Group will no doubt be a focus for lender Westpac following its recent sharp share price decline.

Among the firms that have pitched for the role of advising NAB and ANZ on Steinhoff interests in Australia are FTI Consulting, McGrathNicol, Korda Mentha and PPB.

An appointment is expected to be made shortly.

Dataroom for Wednesday on Fantastic Furniture

German prosecutors launched an investigation in August into allegations that the company’s management used off-balance sheet entities to hide losses and artificially pump up its valuation.

Dataroom for Wednesday on Fantastic Furniture

Steinhoff has denied the allegations and hired PwC to conduct an independent investigation in light of what it said was new information relating to accounting irregularities.

In recent years, Steinhoff has been highly acquisitive. It purchased US mattress firm Sleepy last year for $US2.4bn and South Africa’s Pepkor in 2015 for about $US5.7bn.

Local banks are getting nervous as they face the potential collapses of other high-profile brands in the retail industry.

A decision on whether to allow a company to keep trading typically happens around the third week of January after lenders have digested the results from the Christmas trading period.

Earlier this month, DataRoom revealed that Specialty Fashion Group, which owns the Millers, Katies, City Chic and Rivers brands, had hired restructuring firm FTI Consulting to offer assistance in what some believe is further evidence the company’s future hangs in the balance.