Shareholders tremble

Varta plans radical restructuring with debt cut

The battery manufacturer Varta is in serious financial trouble

(Bild: AFP/AFP (Symbolbild))

The battery manufacturer Varta, which is majority-owned by the Austrian investor Michael Tojner, wants to regain its financial footing with a radical cut. The ailing company from Ellwangen plans to file for pre-insolvency restructuring proceedings at Stuttgart District Court shortly - probably on Monday - as Varta announced on Sunday evening.

The debt burden of almost 500 million euros must be significantly reduced, which would require fresh capital of almost 100 million euros, said CEO Michael Ostermann, who has been brought on board as a reorganizer.

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

Michael Tojner

(Bild: APA/GEORG HOCHMUTH)

Ostermann, who joined Varta in May, said that it is still unclear which of the two solutions will come to fruition. "In the end, it is important to me that we have a good solution for Varta."

Shareholders would go away empty-handed
The existing shareholders would go away empty-handed in both cases. This is because 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 the exclusion of subscription rights and the issue of new shares. On Friday, the shareholders' shares were still worth 440 million euros.

(Bild: AFP)

Banks and hedge funds must play along
"I have set out to save Varta. This is a matter close to my heart." Without a reduction in debt, Varta would not be able to invest appropriately, explained Ostermann. "The aim is to cut the debt." However, the banks and hedge funds, which have bought into a syndicated loan of 235 million euros, have to play along. Varta has borrowed 250 million euros with promissory note loans.

I set out to save Varta. This is a matter close to my heart. The aim is to cut the debt.

Vorstandschef Michael Ostermann

High double-digit million euro capital injection as a prerequisite 
A high double-digit million capital injection is the prerequisite for the company to receive a positive going concern forecast from the experts, said Ostermann. This, in turn, is the basis for avoiding insolvency. Tojner, who holds a good 50 percent of the Varta shares, would contribute a good half and thus retain the majority, while the rest could come from Porsche. Varta would then be fully financed until 2027.

Porsche in negotiations with Varta
"We can confirm that Porsche is in negotiations (with Varta)," said a spokesperson for the sports car manufacturer. The Volkswagen subsidiary is primarily interested in the large lithium-ion battery cells that are to be used in the next Porsche 911 GTS. "The aim of our involvement would be to maintain this key technology in Germany."

Porsche had signaled that it would acquire a majority stake in the Varta subsidiary V4Drive, which manufactures 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," explained the car manufacturer. However, talks are still ongoing.

Porsche concern

(Bild: AFP )

Varta: This is the reason for the imbalance
According to Ostermann, the reason for the imbalance is investments made in 2021 and 2022 that have not yet paid off - in the large lithium-ion batteries, but also in the mini batteries for headphones. V4Drive was the great hope for Varta, but turned out to be a burden. Due to a lack of orders, the company put the construction of a factory for large lithium-ion batteries on hold.

No annual financial statements for 2023 yet
The company has not yet presented its annual financial statements for 2023 - due to a cyber attack in the spring, but also because of the uncertain future. It will take at least until the second half of August before the restructuring concept is implemented, Varta explained.

The Corporate Stabilization and Restructuring Act (StaRUG) has been in force in Germany for three years. The aim of these proceedings is to prevent an operationally viable company from sliding into bankruptcy. The resistance of individual creditors and shareholders can be overridden. The Nuremberg-based automotive supplier Leoni was restructured in this way last year. There, too, the shareholders lost everything, which met with fierce criticism from investor activists.