Steinhoff’s situation worsened this week as ratings agency Moody’s further downgraded the retail giant as its UK companies are likely to be sold off.
The South African Owner of Poundland, Bensons for Beds and Harvey’s has continued its dramatic downward spiral this week as Moody’s dropped its rating to a CAA1. This rating is the 17th of 21 possible levels and means that Steinhoff represents an incredibly high credit risk.
On Thursday Moody’s expressed concerns that Steinhoff may have insufficient cash to maintain its European operations, threatening the future of its UK arms.
This is due to Steinhoff’s £1.3 billion debt pile. The ongoing accounting scandal that has so far wiped around 90 per cent off its share values, estimated to represent £9 billion, has made it “challenging to either repay or refinance these debt maturities”.
Many of Steinhoff’s companies have also seen their credit insurance cancelled or reduced in recent weeks, further fuelling the crisis.
“The situation has been compounded by its operating companies placing an additional liquidity burden on Steinhoff’s centralized treasury function to fund their working capital needs,” Moody’s said.
With speculation growing over the fate of Steinhoffs UK companies, a Poundland spokesperson said it had “always been run at arms length from Steinhoff” and was “independent, profitable and financially strong, delivering positive cash flows”.