renovation – Varta grasps at straws – Shareholders must run out

The hard-hit battery company Varta plans to drive out old shareholders in its fight for survival. Creditors are also expected to give up a large portion of their cash and claims – there is already resistance to the company’s plans.

Varta announced on Sunday evening in Ellwangen that it would file an application for a short-term restructuring plan under the German Enterprise Restructuring and Reorganization Act (StaRUG) with the Stuttgart District Court in order to prevent Varta from going bankrupt.

Bittersweet news for shareholders

Although the announcement emphasized safeguarding jobs and protecting the interests of creditors, it contained bad news for former shareholders: both of the company’s restructuring proposals provide for a simplified reduction of the company’s capital to zero euros – followed by a capital increase with exclusion of subscription rights and the issuance of new shares.

Since, according to Varta, it is unlikely that the existing shareholders will agree to the loss of their entire shareholding and complete exclusion from the company, the Enterprise Restructuring and Reorganization Act (StaRUG) comes into effect.

This law states that individual shareholders or creditors no longer have the right to prevent an operationally viable company from being jeopardized. It also plans a debt restructuring, which creditors will only approve if the capital is reduced to zero.

Also conversations with Porsche

Varta has a financial need in the high double-digit millions of euros. To cover this, the involvement of financial creditors and investors is planned. Negotiations are currently underway with former majority shareholder Michael Tojner, who is also chairman of the supervisory board, and Porsche AG, which belongs to the Volkswagen Group. Porsche had announced at the beginning of this month that it wanted to buy Varta’s electric car battery business.

Major creditors are skeptical about the plan outlined today, according to information from financial circles, because they would be excluded from the planned capital increase. The possibility to inject new capital and to remain involved in the company would be reserved for the former majority shareholder and Porsche. This is contrary to fair treatment.

According to estimates by major creditors, this is a prerequisite for the StaRUG procedure to have a chance of success. The creditors’ proposals, which have been available for some time, have not yet been sufficiently considered. And that despite the statement by Varta CEO Michael Ostermann in an interview with the Reuters news agency on Sunday that both proposals would be examined in the interests of Varta.

Varta’s commitments to major institutional creditors such as banks and hedge funds reportedly involve a consortium loan and bonds worth almost half a billion euros. Creditor representatives are therefore urging them to be closely involved in the planned rescue measures. Varta was floated on the stock exchange in 2017 at 17.50 euros. The paper was in high demand on the stock exchange for a long time. The price had risen to 181.30 euros at the beginning of 2021, only to fall again quickly. The stock price had cost 10.32 euros at the closing bell of Xetra on Friday. The market capitalization of the company was therefore around 440 million euros. Just over half of the shares are held by Montana Tech Components, which in turn is held by the chairman of the supervisory board Michael Tojner.

1. Despite opposition from old shareholders, Ellwangen-based Varta plans to use the German Restructuring and Reorganization of Enterprises Act (StaRUG) in the Stuttgart court. The aim is to reduce the capital to zero euros and avoid insolvency.
2. Creditors in Baden-Württemberg are skeptical of the company’s restructuring plan. They are excluded from the planned capital increase, and former majority shareholder Michael Tojner and Porsche AG, who had shown interest in VARTA’s electric car battery business, are benefiting from this.
3. To cover its financial needs of tens of millions of euros, Varta is currently negotiating with its former majority shareholder Michael Tojner and Porsche AG, which belongs to the Volkswagen Group.
4. Electric vehicle giant Porsche had previously expressed interest in acquiring VARTA’s electric car battery division, but the current capital restructuring plan runs counter to fair treatment of major creditors.
5. The German insolvency proceedings under StaRUG can only succeed if the proposals of the major creditors, which have not been sufficiently taken into account, are taken into account.

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