Shareholders tremble – Varta plans radical restructuring with a haircut

The debt burden of almost 500 million euros must be reduced significantly and new capital of almost 100 million euros is needed, says CEO Michael Ostermann, who has been brought on board as restructuring manager.

One of the two competing proposals is a joint capital injection from former major shareholder Tojner and sports car maker and Varta customer Porsche. The other comes from creditors.

It is still unclear which of the two solutions will come into play, said Ostermann, who joined Varta in May. “Ultimately, it is important to me that we have a good solution for Varta.”

In both cases, the existing shareholders would come away empty-handed. Both restructuring proposals submitted to the company provide for a simplified reduction of the company’s share capital to zero euros, combined with a subsequent capital increase with exclusion of subscription rights and the issue of new shares. On Friday, the shareholders’ shares were still worth 440 million euros.

“I wanted to save Varta. This is a cause that is close to my heart.” Without reducing debt, Varta would not be able to invest adequately, Ostermann explains. “The goal is a haircut.” But the banks and hedge funds, which bought a syndicated loan worth 235 million euros, have to play along. Varta borrowed 250 million euros with promissory notes.

A capital injection in the high double digits is a prerequisite for the company to receive a positive continuation forecast from the experts, Ostermann says. This in turn is the basis for avoiding bankruptcy. Tojner, who owns more than 50 percent of Varta shares, would contribute more than half and thus the majority could come from Porsche; this would mean that Varta would be fully financed until 2027.

“We can confirm that Porsche is in negotiations (with Varta),” a spokesman for the sports car manufacturer said. The Volkswagen subsidiary is primarily concerned with the large lithium-ion battery cells that will be used in the next Porsche 911 GTS. “The aim of our commitment would be to keep this key technology in Germany.” Porsche had indicated that it would take over the majority of the Varta subsidiary V4Drive, which produces the car batteries. But that alone is apparently not enough. “Under certain circumstances, we could therefore imagine participating in a financial restructuring of Varta AG as a whole,” the car manufacturer explained. But the discussions were still ongoing.

According to Ostermann, the reason for the imbalance lies in investments from 2021 and 2022 that have not yet paid off – in large lithium-ion batteries, but also in mini batteries for headphones. V4Drive was the great hope for Varta, but turned out to be a risk. Due to a lack of orders, the company has suspended the construction of a factory for large lithium-ion batteries.

The company has not yet presented its 2023 financial statements – due to a cyber attack in the spring, but also because of the uncertain future. Varta explained that it will take at least the second half of August before the renovation concept is implemented.

In Germany, the Corporate Stabilization and Restructuring Act (StaRUG) has been in force for three years. These procedures are intended to prevent an operationally viable company from going bankrupt. The resistance of individual creditors, but also of shareholders, can be undermined. The Nuremberg car supplier Leoni restructured itself in this way last year. There too, the shareholders lost everything, which was fiercely criticized by investors’ representatives.