Varta's major creditors are preparing to assume control of its profitable consumer battery division, including household batteries. This action follows the expiration of a standstill agreement on July 22nd, as efforts to secure a broader restructuring deal for the struggling German battery maker, Varta AG, have reportedly failed. The creditors, spearheaded by London-based funds Blantyre Capital, Whitebox, and Bluebay, along with Deutsche Bank, hold a significant portion of Varta's total debt, which has a nominal value of $298 million including accrued interest. These creditors had already obtained a preliminary approval from the Federal Cartel Office in June to acquire minority stakes of over 25% each in Varta, a move initially described as a precautionary measure to protect their interests.
The potential takeover of the consumer division is primarily driven by a debt-to-equity swap, where the creditors would convert their claims into ownership stakes in this specific business unit. This scenario is appealing to creditors because the consumer segment is considered highly profitable within Varta's overall operations. The secured assets, including the consumer division, are managed by Global Loan Agency Service (Glas) as a trustee. This strategic maneuver would allow the creditors to potentially resell the business at a profit later, rather than face significant losses on their investments. It's reported that a valuation of the consumer division estimates its worth at $240 million, while the total debt stands at $298 million, indicating that junior creditors might experience losses in such a scenario.
Adding to Varta's challenges, the company recently announced the cessation of coin cell production in Nördlingen due to the loss of a major customer, widely believed to be Apple, which will result in approximately 350 job cuts. This loss, effective from October, necessitates a revised restructuring plan. While current shareholders, including the Austrian entrepreneur Michael Tojner and Porsche, had injected $60 million in fresh equity during a previous StaRUG restructuring, new capital infusions may still be required. Pino Sergio, a potential investor, indicated he secured a financing letter for $300 million to address Varta's legacy debt, aiming to facilitate a broader solution for the company.
Several scenarios for Varta's future have been discussed, including a debt-to-equity swap, the entry of new investors, or even insolvency for the remaining parts of the business. The Tojner group has reportedly offered to acquire the remaining Varta assets for a symbolic $1. The current financial situation is dire, with existing principal lenders holding senior debt, followed by old consortium creditors (including BayernLB), and then smaller Sparkassen and Volksbanken. While a debt-to-equity swap is not typically preferred by financiers who seek capital repayment over operational involvement, it appears to be a crucial step in the absence of a comprehensive restructuring agreement, allowing key creditors to mitigate their losses by taking control of a valuable asset.
The discussions surrounding Varta's future have been complex and prolonged. The standstill agreement, which prevented creditors from calling in their loans, expired on July 22nd. An extension to this agreement, possibly into August, was rumored but appears not to have materialized for the core standstill itself, potentially only applying to the delivery of a restructuring opinion report. Porsche AG has also been in discussions with other creditors, including RBC BlueBay Asset Management, regarding a potential restructuring deal, highlighting the complexity and multiple stakeholders involved in Varta's ongoing financial crisis.
