IVG Said to Mull Court-Approved Restructure Amid Debt TalksDalia Fahmy and Julie Miecamp
IVG Immobilien AG is examining whether it qualifies for a court-supervised restructuring after the debt-laden German real estate company’s creditors failed to offer an alternative by yesterday’s deadline, a person with knowledge of the matter said.
IVG hired a law firm that will determine whether the Bonn-based company meets the criteria for a “Schutzschirmverfahren,” Germany’s equivalent of the U.S. Chapter 11 bankruptcy, said the person, who asked not to be named because the information is private. IVG is seeking to renegotiate more than 3 billion euros ($4 billion) of debt.
The missed deadline means IVG shareholders won’t vote on a proposal at the Sept. 12 annual meeting and the company will “examine whether the positive going concern forecast for IVG Immobilien AG can be upheld,” IVG said in a statement after the market closed yesterday. If the restructuring begins, the company will have three months to reach an agreement with creditors under the supervision of a court-appointed administrator.
IVG will hold further talks with creditors about an out-of-court restructuring deal, according to the person. A consensual restructuring would ensure “the greatest possible preservation of value for all the company’s stakeholders,” IVG said in yesterday’s statement.
A spokesman for the company declined to comment.
IVG, whose shares have lost more than 99 percent since 2007 after the value of its assets plunged, began negotiating with holders of its loans and bonds in May. The company needs to raise as much as 120 million euros after losing access to its subsidiaries’ income and to help cover the cost of the refinancing efforts, according to a July 19 statement.
IVG is negotiating with holders of 2.4 billion euros of syndicated loans, a 400 million-euro hybrid deal and a 400 million-euro convertible bond, according to IVG.
Most of the debt matures this year and next, though “major creditor groups” are willing to extend the accelerated repayment date on the convertible bond from 2014 as well as the December 2013 maturity on a 100 million-euro loan, IVG said. IVG’s convertible bonds dropped to about 60 percent of face value after the statement, down from about 64 percent at the start of the week, according to prices compiled by Bloomberg.
Aurelius Capital Management LP, a New York-based hedge fund that owns IVG convertible bonds, on July 23 questioned IVG’s recovery analysis. It challenged the accounting of a 400 million inter-company loan and the collateral granted to holders of the larger of its two syndicated loans. Aurelius’s own calculations would increase convertible-bondholders recovery significantly.
IVG manages property assets valued at 21 billion euros, the 2012 annual report shows. That figure includes 15 billion euros of buildings, such as London’s Gherkin office tower, in funds owned by institutional and private investors. The biggest building owned directly by IVG is the Squaire in Frankfurt, which is valued at 800 million euros and has debt of 500 million euros, according to the report.
Assets held in the funds aren’t part of the restructuring talks.