hek Frankfurt
Battery manufacturer Varta has reached an agreement with creditors and investors on a financial restructuring. The key points of the concept are a debt cut of 59% of financial liabilities, the reduction of equity to zero and 100 million euros in fresh liquidity. As expected, the new main shareholders are the previous major shareholder Michael Tojner and the sports car manufacturer Porsche. The third block is made up of external investors who hold 36% of the equity through a value recovery instrument. Tojner will no longer control the company in the future.
With the agreement, financing is secured until the end of 2027, Varta announced. Financial liabilities will fall by EUR 285 million, from EUR 485 million to EUR 200 million. In addition, there will be a new senior secured loan of EUR 60 million. This means that financial debt will amount to EUR 260 million in the future.
60 million euros of new equity
After the capital cut to zero, MT InvestCo, controlled by the Austrian entrepreneur Tojner, and a Porsche holding company are bringing in 60 million euros of new equity. Of this, 40 million euros will be provided through a cash capital increase. Porsche is paying in 30 million euros and Tojner 10 million euros. A further 20 million euros will be used to contribute real estate that Varta uses but previously belonged to the major shareholder Tojner. Porsche wants to use this investment to secure the majority acquisition of the V4Drive division, which has developed a high-performance battery for electric cars.
The new first-tier financing of 60 million euros is being provided by existing lenders. These lenders participate in 36% of Varta’s economic equity through a virtual participation. The remaining 64% is shared between Porsche and Tojner (32% each). In return for waiving the debt, lenders who do not participate in the new loan receive a debtor certificate that allows them to benefit from the company’s recovery if specified EBITDA figures (earnings before interest, taxes, depreciation and amortization) are exceeded.
Free float is being squeezed out
The capital cut to zero means that existing shareholders lose their investment. The free float, which currently holds 49.9% of the share capital, even comes away completely empty-handed because, unlike the main shareholder Tojner (previously 50.1%), it has no opportunity to participate in the new equity and is thus excluded from future value increases. Varta justifies this with legal requirements: a subscription right for small shareholders requires a stock exchange prospectus, which cannot be produced because there are no audited annual financial statements. The German Association for the Protection of Securities Ownership (DSW) and other shareholder representatives had already sharply criticized the procedure in advance: shareholders would be expropriated “completely and without compensation.”
StaRUG procedure
Varta could be converted into a GmbH as part of the restructuring, it is said. According to previous information, the stock exchange listing will be discontinued. Despite the impending total loss, the market capitalization was most recently at 167 million euros.
The legal framework for the implementation of the financial restructuring is the Corporate Stabilization and Restructuring Act, or StaRUG for short. Varta must now submit a restructuring plan to the Stuttgart District Court on the basis of the agreements and request dates for the discussion and voting. It is necessary that the majority of the individual groups support the plan with at least 75% each.
Door open for further investors
According to the statement, after the StaRUG procedure has been completed, another investor could come on board within a year with up to 30 million euros. CEO Michael Ostermann reports at least two interested parties, without naming names. Discussions are at an advanced stage.
According to Varta, the agreement was reached with “almost all syndicated lenders” and “certain promissory note creditors”. The latter suggests that a significant proportion of promissory note holders reject the concept. The promissory notes placed in the 2022 financial year have a volume of EUR 250 million. The creditors also include hedge funds, including Whitebox Advisors from the USA. An alternative financing proposal came from this group, which also provided for a subscription right for all shareholders. The syndicated loan amounts to EUR 235 million, with banks having sold more than 40% of the loan amount to special funds.
Tojner’s influence is curtailed
On the equity side, MT InvestCo and Porsche each hold 50% legally (i.e. without the virtual participation of lenders). The structure is said to be designed in such a way that neither Tojner nor Porsche, nor both together, have control. This means that Tojner’s role, who as chairman of the supervisory board had previously had a dominant influence, is being curtailed. Many of those involved were clearly keen to prevent the Austrian investor from regaining a controlling majority. Porsche, for its part, cannot have any interest in controlling Varta, as the stake would then have to be consolidated.
It is also planned that lenders who participate in the new loan will be exempted from the debt cut to this amount. Conversely, this means that the waiver by the other creditors will be correspondingly higher. By implementing the agreed measures, the financing and liquidity of the group would be sustainably stabilized and secured in the long term, comments CFO Marc Hundsdorf. And Chief Restructuring Officer Michael Giesswein is quoted as saying: “The restructuring concept takes into account the interests of all those involved in a balanced way.”
