February 7, 2018 / 3:11 PM / 10 months ago

LPC-Natixis aims to sell its Steinhoff loan exposure

LONDON, Feb 7 (Reuters) - Natixis is seeking to sell out of its approximate US$110m-equivalent exposure in troubled South African retailer Steinhoff in Europe’s secondary loan market, banking sources said.

Natixis is aiming to exit its entire position in Steinhoff, which is fighting for survival after discovering accounting irregularities in December that triggered an 85% share price slide in the group and a raft of changes in its boardroom and leadership.

It is the latest bank to sell out of the company, following a number of other European and US banks de-risking their exposures.

JP Morgan sold an approximate US$60m block of Steinhoff term loans in Europe’s secondary loan market this week and fetched around 73% of face value, sources said.

Other positions sold include a €27.5m block of Schuldschein loans and a €25m block of Steinhoff’s revolving credit facility from an Austrian bank last month.

“Loads of banks have gone from Steinhoff. All the Austrians, some of the Germans and most of the Americans,” a trader said.

Natixis was not immediately available to comment. JP Morgan declined to comment.

Buyers include major hedge funds such as Taconic Capital, Blackstone, Centerbridge and SVP, one of the sources said.

“The hedge funds are taking a view that the fraud isnt as bad as it first seemed and that they expect Steinhoff to survive medium term with an orderly process for selling off the businesses,” the trader said.

The Natixis loans are being auctioned in Europe’s secondary loan market on Wednesday, with first round bids due at 3pm London time. Only the top five bids will be allowed to improve their price into the second round, which will take place at 3.45pm.

The loans are spread across several tranches including US$35.7m of TLB1; US$35.7m of TLB2; and US$35.7m of TLB3. The TLB1, TLB2 and TLB3 are denominated in a mix of euros, sterling and dollars.

There is also US$3.57m of RCF.

Steinhoff’s dollar term loan B1 was quoted at 72% of face value and the TLB2 and TLB3 were quoted at 72.5% of face value this week, according to Thomson Reuters LPC data.

The latest block of Steinhoff loans from Natixis could sell at a lower level because the market has softened slightly due to wider macro volatility and because of the auction yesterday when buyers got a good dose of the loans.

“It will trade lower because of the size and there was a big seller yesterday,” the trader said.

Yet an investor countered: “It is likely to sell well. There are a lot of buyers out there looking for the paper. The funds have obviously taken a view on it and like what they see.”

A level of 73 is seen as being high given the risk profile of the business. If Steinhoff enters administation it is likely to sell off its divisions at a steep discount, several sources said.

BNP Paribas said on Tuesday that two specific developments were responsible for a €194m jump in its provisions in the fourth quarter. It did not name the clients, but they are expected to be retailer Steinhoff International and UK government contractor Carillion, who other banks have made big losses on, IFR reported.

Last week Nomura recorded a loss of ¥14bn (US$127m) relating to a single margin loan, which weighed on its international results. The loss was linked to Steinhoff, a source told IFR. It was similar to losses taken by other international banks to the troubled firm, IFR reported.

Bank of America Merrill Lynch, Citi, Goldman Sachs and JP Morgan all took hits in the fourth quarter related to Steinhoff, and loans made to its former chairman Christo Wiese secured by his stake in Steinhoff, IFR reported.

Steinhoff’s US$4bn acquisition loan agreed in 2016 was led by BAML and JP Morgan, which were joined by Santander, BNP Paribas, Citi, Commerzbank, Credit Agricole, HSBC, MUFG, Mizuho, Natixis, RBC, RBS, Societe Generale, Amegy Bank, Barclays, Erste, Lloyds, Raiffeisenbank and Wells Fargo.

Steinhoff is asking some of its convertible bond holders including investors in its 2023 1.1 billion euro notes to waive their rights in relation to its failure to deliver certificates of compliance, it said on Tuesday. (Editing by Christopher Mangham)

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