The troubled company from Ellwangen plans to file a pre-insolvency restructuring procedure with the 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, and fresh capital of almost 100 million euros is needed, said CEO Michael Ostermann, who was brought on board to carry out the restructuring. One of two competing proposals is a joint capital injection from the previous major shareholder Tojner and the sports car manufacturer and Varta customer Porsche. The other comes from the creditors.
Will shareholders come away empty-handed?
Which of the two solutions will be used is still open, said Ostermann, who joined Varta in May. “In the end, what is important to me is that we have a good solution for Varta.”
In both cases, the current shareholders would come away empty-handed. 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 exclusion of subscription rights and the issue of new shares. On Friday, the shareholders’ shares were still worth 440 million euros.
“A matter of the heart”
“I set out to save Varta. This is a matter close to my heart.” Varta cannot invest appropriately without reducing debt, explained Ostermann. “The goal is a debt cut.” But the banks and hedge funds, which have bought into a syndicated loan of 235 million euros, have to play along. Varta borrowed 250 million euros with promissory notes.
A capital injection in the high double-digit millions is a prerequisite for the company to receive a positive forecast for its continued existence from the experts, said Ostermann. This, in turn, is the basis for avoiding insolvency. Tojner, who holds a good 50 percent of Varta shares, would contribute a good half and thus retain the majority, the rest might come from Porsche. This would ensure that Varta is fully financed until 2027.
Negotiations with Porsche
“We can confirm that Porsche is in negotiations (with Varta),” said a spokesman 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 commitment would be to preserve this key technology in Germany.” Porsche had signaled that it would take over the majority of the Varta subsidiary V4Drive, which produces the car batteries. But that alone is apparently not enough. “Under certain circumstances, we might therefore imagine participating in a financial reorganization of Varta AG as a whole,” explained the car manufacturer. However, talks on this are still ongoing.
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 Varta’s great hope, 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
The company has not yet submitted 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 for the restructuring plan to be implemented, Varta explained.
The Corporate Stabilization and Restructuring Act (StaRUG) has been in place in Germany for three years. These procedures are intended to prevent an operationally viable company from going bankrupt. In doing so, the resistance of individual creditors, but also of shareholders, can be circumvented. The Nuremberg-based automotive supplier Leoni used this method to restructure itself last year. There, too, the shareholders lost everything, which was met with fierce criticism from investor protection groups.