IVG Creditors Owed Over $4.4 Billion Agree Debt-Equity Swap

IVG Immobilien AG, once Germany’s biggest real estate company, will be handed over to creditors after lenders approved a plan to restructure 3.2 billion euros ($4.4 billion) of debt.

Creditors voted today in a court-supervised poll in favor of a debt-to-equity swap and capital increase that will take place in mid-2014, IVG said in a statement today. The company said on Feb. 24 that the swap will allow it to cut its debt by 2.2 billion euros. Cerberus Capital Management LP, Aurelius Capital Management LP and Morgan Stanley are among the creditors, according to a person with knowledge of the matter who asked not to be named because the information is private.

A spokeswoman at Morgan Stanley declined to comment. Spokesmen for Cerberus and Aurelius didn’t respond to requests for comment.

IVG’s value has plummeted since 2007 as demand for its office buildings fell in the wake of the financial crisis. The Bonn-based company owns about 5 billion euros of office buildings in Europe and manages 15 billion euros of real estate for private and institutional clients. It was once Germany’s biggest publicly held property company.

IVG fell 30 percent to less than 1 cent in Frankfurt trading, giving the company a market value of 1.5 million euros. The shares reached a high of about 35 euros in 2007.

Gherkin Tower

The company agreed to sell its private investors business, which manages a fund that owns a 50 percent stake in London’s Gherkin tower, to German competitor Zech Group GmbH, according to a statement today. A sale would bring the value of the assets IVG manages for clients to about 12 billion euros.

Today’s vote means IVG can proceed with a plan, announced in a Feb. 24 statement, to issue new shares valued at 1.4 billion euros, which would then be exchanged against syndicated loans and convertible bonds.

The approval means that creditors will be the new owners, Georg Kanders, an analyst at Bankhaus Lampe KG, said before the vote.

“The old shareholders have lost their stake and the creditors are the new shareholders,” he said.

Last Chance

Once the debt-to-equity swap has taken place, the shareholders can decide whether to keep IVG’s businesses running or sell off units, Kanders said. “There’s something to be said for having a diversified business, but at the same time it’s a favorable market for property sales.”

IVG said on Feb. 24 it would split into three units, including its real estate, institutional funds and cavern-storage businesses, and that it would cut its staff to 320 from 400.

Today’s vote was IVG’s last chance to avoid going into insolvency, in which an administrator is assigned by the court to sell its assets and distribute proceeds to creditors according to seniority.

IVG has been negotiating a deal with creditors for more than a year, and in August entered court-supervised bankruptcy protection similar to a U.S. Chapter 11 reorganization.