Disaster for shareholders

High debts: Varta files for reorganization proceedings

The manufacturer of microbatteries has been in difficulties for some time.

(Bild: APA Pool/APA/dpa/Karl-Josef Hildenbrand)

The faltering battery group Varta, which is majority-owned by Austrian investor Michael Tojner, has filed for so-called pre-insolvency restructuring proceedings at Stuttgart District Court. A corresponding application has been received, a court spokesman confirmed. The share lost up to around 80 percent of its value on Monday. 

Varta car batteries are not affected; the company now only has a similar name to Tojners Varta.

On Sunday evening, the affected company announced its intention to file a restructuring plan in accordance with the German Corporate Stabilization and Restructuring Act (StaRUG). This is intended to avert a possible insolvency of Varta in the long term.

Creditors must forego most of their money
In its fight for survival, Varta wants to force existing shareholders out of the company. In addition, creditors are to give up a large part of their money and claims - resistance to the company's plans is already forming among them.

"The latest developments make the situation for shareholders even worse," commented analyst Michael Punzet from DZ Bank. "The intended financial restructuring of Varta AG is clearly at the expense of existing shareholders and creditors." The expert lowered the fair value of the shares from 8 euros to 0 euros.

First, the fundamental problem of debt must be resolved. This decision is associated with tough cuts - I too will lose the entire share value in the course of the restructuring now underway.

Mehrheitseigentümer Michael Tojner

"All alternatives were weighed up together with the management, and the decision was not easy for anyone. All expert opinions and calculations have also come to this conclusion," said majority shareholder Michael Tojner on Monday. "First of all, the fundamental problem of debt must be resolved. This decision is associated with severe cuts - I am also losing the entire value of my shares in the course of the restructuring that has now been started," the investor continued.

Michael Tojner is also losing a lot of money.

(Bild: APA/GEORG HOCHMUTH)

4000 employees
The group, which has around 4,000 employees, has been in serious difficulties for some time. The once buoyant business with rechargeable lithium-ion button cells for, among other things, the then booming wireless headphones, has suffered severe setbacks due to cautious consumers and competition from Asia. The business with wallboxes for storing electricity, including for charging electric cars, also failed to gain momentum. The share price has been on a downward trend for some time.

Varta was floated on the stock exchange for 17.50 euros in 2017 and was in demand for a long time. At the beginning of 2021, the share price rose to 181.30 euros. Since then, however, it has been falling. On Monday, the shares last cost just 3.65 euros. The company's market capitalization was thus still around 155 million euros. Just over half of the shares are owned by Montana Tech Components, which in turn is owned by Supervisory Board Chairman Tojner.

Bitter news for shareholders
While Sunday's announcement emphasized the safeguarding of jobs and the protection of creditors' interests, it contained bitter news for existing shareholders: 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.

As Varta estimates that the existing shareholders are unlikely to approve the loss of their entire share package without compensation and the complete squeeze-out from the company with the required majority of 75 percent of the share capital present, the StaRUG is to be applied.

This stipulates that individual shareholders or creditors no longer have any rights so as not to jeopardize the continued existence of an operationally viable company. A haircut is also to be implemented, which the creditors would only agree to, according to the announcement, if the equity capital is reduced to zero.

Hoping for Porsche 
Varta has a financial requirement in the high double-digit million euro range. The participation of financial creditors and investors is also planned to cover this. To this end, negotiations are currently underway with the previous majority shareholder and Chairman of the Supervisory Board Tojner and the German sports car manufacturer Porsche AG, which belongs to the Volkswagen Group. The latter had only announced at the beginning of the month that it wanted to buy Varta's electric car battery business.

(Bild: AFP )

Creditors are skeptical about the plan
According to information from financial circles, major creditors are skeptical about the plan that has now been outlined, as they would be excluded from the planned capital increase. The option of providing fresh money after the capital reduction and thus retaining a stake in the company would be reserved for the existing majority shareholder and Porsche. This would be contrary to fair and equal treatment.

According to major creditors, however, this is a prerequisite for the StaRUG proceedings to have any chance of success. According to the circles, the proposals made by the major creditors, which have been available for some time, have not yet been sufficiently appreciated. This is despite the fact that Varta CEO Michael Ostermann asserted in an interview with the Reuters news agency on Sunday that he wanted to examine both proposals for the benefit of Varta.

500 million euros in debt
The liabilities owed by Varta to large institutional lenders such as banks and hedge funds reportedly involve a syndicated loan and promissory bills totaling almost half a billion euros. Creditor representatives are therefore hoping to be more closely involved in the planned rescue measures.