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IVG to Ask Court to Oversee $4.3 Billion Debt Restructuring

Aug. 20 (Bloomberg) -- IVG Immobilien AG, the German property company that’s lost most of its market value, said it will file for court protection to reorganize 3.2 billion euros ($4.3 billion) of debt after talks with creditors failed.

IVG will apply today with the Bonn District Court to initiate a proceeding similar to U.S. bankruptcy reorganization, the company, based in the same city, said in a statement. The procedure protects companies from claims while they try to reach a court-approved agreement.

“Despite weeks of intensive mediations and negotiation efforts on the the part of IVG, the individual creditor groups were unfortunately unable to agree on a consensual solution taking into account all stakeholder interests,” Chief Executive Officer Wolfgang Schaefers said in the statement.

IVG, once Germany’s biggest publicly held property company, saw 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.

IVG fell 4.8 percent to 8 cents at the 5:30 p.m. close in Frankfurt, giving the company a market value of 16.6 million euros. The shares reached a high of about 35 euros in 2007.

Creditors’ Proposal

On Aug. 12, IVG said it was examining a proposal by lenders that would wipe out most of the company’s share capital. The 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.

IVG is negotiating with holders of 2.4 billion euros of syndicated loans, a 400 million-euro hybrid loan and a 400 million-euro convertible bond, the property company said on May 31. At the time, IVG proposed a debt-for-equity swap and said it must reduce borrowings by 1.75 billion euros to bring its loan-to-value ratio to “a normal market level.”

IVG’s debt now exceeds 80 percent of its asset value and the company plans to bring it closer to 60 percent, according to a person with knowledge of the company’s financial position. IVG owes money to more than 200 lenders, the person said.

Stakeholders’ Interests

IVG decided on a filing for the self-administration procedure because it offers “the best tools for successfully implementing the initiated restructuring of IVG in the interests of all stakeholders,” according to today’s statement.

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 not be sold to repay creditors, IVG spokesman Oliver Stumm said.

IVG is being advised by financial consultants at Rothschild Group, and lawyers at Freshfields Bruckhaus Deringer LLP and Goerg Partnerschaft von Rechtsanwaelten.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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