BofA Curbs Loan Type After Steinhoff Loss -- WSJ
21 March 2018 - 6:02PM
Dow Jones News
By Rachel Louise Ensign
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 21, 2018).
Bank of America Corp. has wrapped up its internal review of its
$292 million loss involving troubled South African firm Steinhoff
International Holdings NV and dialed back its appetite for the type
of stock-based loan that caused the loss, people familiar with the
matter said.
Bank of America was one of a number of global lenders that held
pieces of a EUR1.6 billion ($2 billion) loan to Christo Wiese, then
chairman of the South African retailer. Mr. Wiese's shares in the
company served as collateral for the financing. Those shares
collapsed in value last fall after the retailer, which owns
Mattress Firm and the Sleepy's brand, disclosed accounting
irregularities.
The bank said in a statement Tuesday that its review of the loss
is finished. It said the responsible thing to do with such a loss
is to "review it carefully, see if we missed something, and apply
any lessons for the future," adding that the "core cause" of the
loss was due to the behavior of another party.
The review has led the bank to dial back its appetite for
collateralized loans to individuals that are backed solely by a
borrower's holdings of a single stock. These loans leave a bank
with few good options if the stock price collapses.
The collapse in the Steinhoff share price hit Mr. Wiese's
lenders hard. In addition to Bank of America, Citigroup Inc.,
JPMorgan Chase & Co. and Goldman Sachs Group disclosed losses
to what was typically described as a single-name client in the
fourth quarter.
The company involved, people familiar with the matter said, was
Steinhoff. The four banks booked a combined hit to fourth-quarter
earnings of more than $1 billion. Late last year, Bank of America
hired Davis Polk & Wardwell LLP to help it examine the
Steinhoff loss and figure out if it could somehow have been
avoided.
(END) Dow Jones Newswires
March 21, 2018 02:47 ET (06:47 GMT)
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