renovation - Varta grasps at straws - Shareholders should empty out
The severely affected battery company Varta intends to pressure old shareholders out of the company in its fight for survival. Creditors are also expected to give up a large portion of their money and claims - resistance is already forming against the company's plans.
Varta announced on Sunday evening in Ellwangen that it would file for a short-term restructuring plan under the German Companies Restructuring and Reorganization Law (StaRUG) at the Stuttgart District Court to prevent a possible insolvency of Varta.
Bittersweet news for shareholders
Although the announcement emphasized the securing of jobs and the protection of creditor interests, it contained bad news for former shareholders: Both of the company's restructuring proposals envision a simplified reduction of the company's capital to zero euros - followed by a capital increase with exclusion of subscription rights and issuance of new shares.
Given that the existing shareholders are unlikely to approve the loss of their entire shareholding and complete expulsion from the company according to Varta's assessment, the Companies Restructuring and Reorganization Law (StaRUG) will come into play.
This law stipulates that individual shareholders or creditors no longer have the right to prevent an operationally viable company from being endangered. A debt restructuring is also planned, which creditors will only approve if the capital is reduced to zero.
Discussions also with Porsche
Varta has a financial need in the high double-digit million euro range. To cover this, the involvement of financial creditors and investors is planned. Current negotiations are taking place with the former majority owner Michael Tojner, who is also the supervisory board chairman, and Porsche AG, which belongs to the Volkswagen Group. Porsche had announced at the beginning of the month that it wanted to buy Varta's business for electric car batteries.
Large creditors view the plan sketched out today with skepticism, according to information from financial circles, as they would be excluded from the planned capital increase. The possibility of injecting new capital and remaining involved in the company would be reserved for the former majority shareholder and Porsche. This contradicts fair treatment.
According to estimates from large creditors, this is a prerequisite for the StaRUG proceedings to have any chance of success. The creditors' proposals, which have been available for some time, have not been sufficiently considered yet. And this, despite Varta CEO Michael Ostermann's statement in a conversation with the news agency Reuters on Sunday that both proposals would be examined for the benefit of Varta.
At Varta's commitments to major institutional creditors such as banks and hedge funds, it is reportedly about a consortium loan and bonds in the amount of nearly half a billion Euro. Creditor representatives therefore insist on being closely involved in the planned rescue measures. Varta was floated on the stock exchange in 2017 for 17.50 Euro. The paper was in high demand on the stock exchange for a long time. The price had risen to 181.30 Euro as of early 2021, before it fell rapidly again. The stock price had cost 10.32 Euro at the Xetra closing bell on Friday. The market capitalization of the company was therefore around 440 million Euro. Slightly more than half of the shares are owned by Montana Tech Components, which in turn belong to the supervisory board chairman Michael Tojner.
- Despite facing resistance from old shareholders, Varta from Ellwangen plans to utilize the German Companies Restructuring and Reorganization Law (StaRUG) in Stuttgart District Court, aiming to reduce its capital to zero euros and prevent insolvency.
- Creditors in Baden-Württemberg view the company's restructuring proposal with skepticism, as it excludes them from the planned capital increase and benefits the former majority owner Michael Tojner and Porsche AG, which had expressed interest in VARTA's electric car battery business.
- In an attempt to cover its high double-digit million euro financial needs, Varta is holding negotiations with its former majority owner Michael Tojner and Porsche AG, belonging to the Volkswagen Group.
- The electro industry giant Porsche had previously expressed interest in purchasing VARTA's electric car battery business, but the current capital restructuring plan contradicts fair treatment for the large creditors.
- Germany's insolvency proceedings under StaRUG may only have a chance of success if the large creditors' proposals, which have not been adequately considered, are addressed.
