IVG Immobilien AG, the German property company seeking to restructure 3.2 billion euros ($4.3 billion) of debt, said creditors submitted a proposal that would wipe out most of its share capital. The shares fell as much as 26 percent.
Under the proposal, new shares would be issued in a debt-for-equity swap, the Bonn-based company said in a statement on Saturday evening. That would cut its share capital to 0.5 percent of the current value, IVG said.
“The company will shortly assess these results, conduct further negotiations on this basis and, in case of an overall agreement on a detailed level,” invite shareholders and holders of a hybrid bond to vote on the plan, IVG said.
IVG, once Germany’s biggest listed property company, has seen its market value plummet since 2007 after demand for its office buildings fell in the wake of the financial crisis. The shares fell 36 percent to 14 cents in Frankfurt trading. The stock reached a high of about 35 euros in 2007.
The company owns about 5 billion euros of office buildings in Europe, including The Squaire in Frankfurt, which was valued at 800 million euros in the company’s 2012 annual report. IVG manages 15 billion euros of property for private and institutional clients, including a fund that owns a 50 percent stake in London’s Gherkin tower.
IVG reduced the value of the assets on its balance sheet by 350 million euros, according to the statement. These assets include offices, caverns, shareholdings and money owed to the company.
IVG’s creditors include Cerberus Capital Management, BlackRock Inc., Third Avenue Management LLC, Morgan Stanley and Apollo Global Management LLC, according to two people with knowledge of the talks. Aurelius Capital Management LP is also a creditor, according to a July 23 statement from Aurelius.
This year, distressed-debt investors bought IVG bonds and loans at a discount from the original bank lenders in the hope of profiting from a restructuring, according to the two people.
If the plan succeeds, about 2.15 billion euros of debt will be exchanged. Holders of the 1.35 billion-euro syndicated loan I will receive 80 percent of the new shares and holders of a 400 million-euro convertible loan will receive 20 percent. Investors in a 400 million-euro hybrid bond will split 0.5 percent of the existing stock with shareholders.
In addition, syndicated loan I creditors have offered IVG a bridge loan of about 140 million euros to help cover expenses, including restructuring costs, according to the statement.
The plan would enable IVG to avoid a court-supervised restructuring, which the company began considering after creditors failed to offer an alternative by a July 30 deadline, a person with knowledge of the plan said.
IVG’s debt equals more than 80 percent of the value of its assets and the company plans to bring it closer to 60 percent, according to the person. The company owes money to more than 200 lenders, the person said.
IVG is being advised by financial consultants at Rothschild and represented by law firms Freshfields Bruckhaus Deringer LLP and Goerg Partnerschaft von Rechtsanwaelten.