Troubled battery company Varta, majority-owned by Austrian investor Michael Tojner, has filed a so-called pre-insolvency restructuring procedure with the Stuttgart District Court. A spokesman for the court confirmed that a corresponding report had been received. The stock lost up to 80 percent of its value on Monday.
The Ellwangen-based company announced on Sunday evening that it will soon announce a restructuring project in accordance with the Corporate Stabilization and Restructuring Act (StaRUG). This is intended to permanently prevent a possible bankruptcy of Varta.
Creditors must give up most of their money
Varta wants to drive out the existing shareholders in the fight for survival. In addition, the creditors have to give up a large part of their money and their claims; resistance to the company’s plans is already growing.
“The latest developments make the situation even worse for shareholders,” says analyst Michael Punzet of DZ Bank. “The desired financial restructuring of Varta AG is clearly at the expense of existing shareholders and creditors.” The expert lowered the real value of the shares from 8 euros to 0 euros.
“All alternatives have been weighed together with management; the decision was not easy for anyone. All reports and calculations also come to this conclusion,” majority shareholder Michael Tojner said on Monday. “First, the fundamental problem of debt must be resolved. This decision is accompanied by severe austerity measures – I will also lose the entire share value as a result of the restructuring that has now begun,” the investor continued.
4000 employees
The company, which has around 4,000 employees, has been hit hard for some time now. The once flourishing business with rechargeable lithium-ion button cells, including for wireless headphones that were booming at the time, suffered major setbacks due to cautious consumers and competition from Asia. The business with wall boxes for storing electricity, including for charging electric cars, also failed to really get off the ground. The share price has been falling for some time.
Varta was listed on the stock exchange in 2017 at 17.50 euros and was in demand for a long time. At the beginning of 2021, the price had risen to 181.30 euros. But since then, business has gone downhill. On Monday, the newspapers recently cost just 3.65 euros. The company’s market value was still around 155 million euros. Just over half of the shares are held by Montana Tech Components, which in turn belongs to the chairman of the supervisory board, Tojner.
Bitter news for shareholders
While Sunday’s announcement emphasized job security and the protection of creditors’ interests, it contained bitter news for existing shareholders: both restructuring proposals presented to the company provide for a simplified reduction of the company’s share capital to zero euros, combined with a subsequent capital increase, excluding subscription rights and through the issuance of new shares.
Since Varta estimates that it is unlikely that existing shareholders will agree to the loss of their entire shareholding without compensation and complete expulsion from the company with the required majority of 75 percent of the existing share capital, the StaRUG should come into effect.
This stipulates that individual shareholders or creditors will no longer have any rights to not jeopardize the continued existence of an operationally viable company. It will also implement a haircut, which creditors would only agree to if equity were reduced to zero, according to the announcement.
Hoping for Porsche
Varta has financial needs in the double-digit millions of euros. The participation of financial creditors and investors is also planned for the coverage. Negotiations are currently underway with, among others, the former majority shareholder and chairman of the supervisory board, Tojner, and the German sports car manufacturer Porsche AG, part of the Volkswagen Group. He had only announced at the beginning of this month that he wanted to take over Varta’s battery division for electric cars.
Creditors view the plan with skepticism
According to information from financial circles, major creditors are skeptical about the plan that has now been outlined, because they would be excluded from the planned capital increase. The possibility of giving fresh money after the capital reduction and thus continuing to hold a stake in the company would remain reserved for the previous majority shareholder and Porsche. This is contrary to fair, equal treatment.
According to major creditors, however, this is a condition for the StaRUG procedure to have a chance of success. According to sources, the proposals of the major creditors, which have been available for some time, have not yet been sufficiently assessed. And this despite the fact that Varta boss Michael Ostermann assured the Reuters news agency on Sunday that he wanted to examine both proposals in Varta’s favor.
500 million euros in debt
According to reports, Varta’s obligations to major institutional lenders such as banks and hedge funds include a syndicated loan and promissory notes totaling almost half a billion euros. Creditor representatives are therefore hoping to be more closely involved in the planned rescue measures.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
