Tue 01/15/2019 05:12 AM
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Relevant Documents:
SEAG Nov. 29 CVA Proposal
SFHG Nov. 29 CVA Proposal

Steinhoff is reviewing a number of options to address the challenge to Steinhoff Europe AG’s corporate voluntary arrangement, or CVA, by former business partner-turned-foe Andreas Seifert, including amending the CVA document, settling out of court, dismissing the challenge application in court, and resolving other lawsuits with Seifert-related entities first, sources familiar with the matter said.

Steinhoff said on Jan. 10 it was notified that LSW GmbH challenged SEAG’s CVA, before the Jan. 11 challenge deadline. LSW abstained from voting in SEAG’s CVA, and it had €581.1 million of claims admitted by Simon Edel of EY as chairman of SEAG’s creditors meeting, according to the creditors’ report. Steinhoff said in the SEAG CVA proposal that the LSW claim of €388.3 million is disputed by the company and is the subject of ongoing legal proceedings, including an ownership dispute around Conforama’s indirect parent AIH Investment Holding AG and loan claims against SEAG and AIH.

The company would need to address the SEAG CVA challenge to satisfy the conditions for the CVA to become effective, according to the proposal. Otherwise, the CVA would terminate after the long-stop time of 5 p.m. GMT on March 29. Steinhoff said last week that implementation of the SFHG CVA will also not occur until the challenge to the SEAG CVA has been resolved.

Steinhoff sought to address the LSW loan claim in its SEAG CVA proposal, giving LSW the right to participate in the accordion facilities in the new Lux Finco 2 first lien loan and the new Lux Finco 2 second-lien loan, if the claim is determined or resolved in LSW’s favor. The new Lux Finco 2 loans maturing Dec. 31, 2021 would be issued to existing SEAG creditors as takeback paper. The LSW accordion facilities, if drawn, will form part of the B1 and B2 tranches of the new Lux Finco 2 loans.

A LSW settlement has the following definition, according to the SEAG CVA proposal:
 
  • A final non-appealable judgment of a court of competent jurisdiction awarded in favor of LSW in relation to the LSW claim;
  • A full and final settlement of the LSW claim recommended by the litigation working group with board approval; or
  • A full and final settlement of the LSW claim otherwise approved by the new first lien majority lenders and the new second lien majority lenders.

A spokesperson for Steinhoff declined to comment.

Seifert Proceedings

The proceedings between Steinhoff and Seifert-related entities include the following, according to the CVA proposal:
 
  • In 2015, HLSW started proceedings in the Austrian Court against SEAG and Steinhoff Holding Beta GmbH in relation to an asserted entitlement to 50% of the shares in Conforama’s indirect parent AIH;
  • In 2015, LSW started proceedings in the Austrian Court against SEAG and AIH asserting an entitlement to repayment of €388.3 million plus interest and costs in respect of a loan agreement pursuant to which AIH and SEAG are expressed to be co-obligors; and
  • On July 20, LSW applied to the Austrian Court for a preliminary injunction against the SEAG and AIH in relation to the restructuring, which applications were both denied by the Austrian Court.
     
Unfair Prejudice, Material Irregularity

Steinhoff said in the SEAG CVA proposal that any creditor entitled to vote at a meeting to approve a CVA may apply to the High Court of Justice in England and Wales on one or both of the two grounds: the CVA unfairly prejudices the interests of that creditor, or there has been material irregularity at or in relation to the meetings called to approve the CVA.

The company said one of the conditions precedent to the SEAG CVA effective date and restructuring effective date was the challenge period either ending without a challenge that would alter the outcome of the CVA creditors’ meeting if determined in favor of the applicant or appellant, or, if there’s been an application, the application or appeal has been withdrawn or dismissed without further right of appeal.

Steinhoff said in the proposal that the CVA creditors coming onboard agree at any court hearing regarding CVA challenge, the company may consent on behalf of them to any modification of or addition to the CVA as the court sees fit to approve, which would not harm CVA creditors’ interests.

The SEAG CVA and the SFHG CVA were approved after more than 90% of those who voted agreed to restructure the two boxes’ debt into loans without cash coupon payments.
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