IVG Immobilien AG (IVG), the German property company that’s lost most of its market value, submitted a plan to a Bonn court to cut its debt by 2.2 billion euros ($3 billion) and issue new shares. The deal would transfer ownership to IVG’s creditors.
IVG, which has been in talks with its lenders to restructure 3.2 billion euros of debt for more than a year, said creditors will vote on the plan on March 20, according to a statement today. IVG will seek approval from creditors to issue new shares valued at 1.4 billion euros, which would then be exchanged against syndicated loans and convertible bonds, IVG spokesman Juergen Herres said by phone. The Bonn-based company plans to delist its stock from the Frankfurt exchange.
IVG, once Germany’s biggest publicly held property company, has seen its value plummet since 2007 after demand for its office buildings fell in the wake of the financial crisis. IVG owns about 5 billion euros of office buildings in Europe and manages 15 billion euros of real estate for private and institutional clients, including a fund that owns a 50 percent stake in London’s Gherkin tower.
In August, IVG applied with the Bonn District Court to initiate a proceeding similar to U.S. bankruptcy reorganization. The procedure protects companies from claims while they try to reach a court-approved agreement.
IVG fell as much as 77 percent to a record low of less than 2 cents in Frankfurt, giving the company a market value of 6 million euros. The shares reached a high of about 35 euros in 2007.
“The board of management is convinced that, with this plan, it has developed a concept that allows for a complete restructuring of IVG,” Chief Executive Officer Wolfgang Schaefers said in the statement. “We are confident that our creditors will also accompany us down this road.”
In August, IVG’s creditors included Cerberus Capital Management, BlackRock Inc. (BLK:US), Third Avenue Management LLC, Morgan Stanley (MS:US) and Apollo Global Management LLC (APO:US), two people with knowledge of restructuring talks said in August. Aurelius Capital Management LP was also a creditor, it said in July.
Under the plan, creditors would receive at least 60 percent of the money owed to them, according to the statement. Holders of the syndicated loan I, convertible bonds and a bank loan from Landesbank Baden-Wuerttemberg will be entitled to swap their debt for the new shares. Hybrid bondholders will lose their claims, the company said. Payments on the syndicated loan II will be deferred.
For the vote, lenders will be divided into groups according to the type of debt they hold. More than 50 percent of each group must vote for the plan, Herres said.
The company says it will focus on its real estate, institutional funds and caverns-storage businesses and cut its staff to 320 from 400.
As a result of the debt reduction, the company’s net-debt to value will fall to between 50 percent and 60 percent. In August, the level was more than 80 percent.
If no agreement with creditors is reached, German law allows the court to appoint an insolvency administrator to sell company assets and distribute the proceeds to creditors, depending on seniority. Properties held in IVG’s client funds can’t be sold to repay creditors.
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