Varta announces restructuring, delisting plans

In spring 2023, Varta AG agreed on a comprehensive restructuring concept . Among other things, the elimination of 800 full-time positions and the focus on promising business areas were intended to bring about an economic turnaround at the German battery manufacturer. But the storage market developed weaker than expected.

Varta also had difficulties in introducing its DC-coupled high-voltage storage systems. All of this led Varta to lower its sales forecast for the current year to EUR 820 to 870 million in June . Previously, EUR 900 million had been forecast.

On Sunday evening, Varta published a statement saying that it “has decided today to notify the competent local court of Stuttgart on short notice of a restructuring project in accordance with the German Corporate Stabilization and Restructuring Act (StaRUG)”. The proceedings is intended to avert possible insolvency and can only be initiated if the company is not yet insolvent.

“The planned StaRUG proceedings are an important building block for the implementation of an updated restructuring concept for Varta. As part of the proceedings, various constellations of possible debt and equity financing will be discussed. The StaRUG proceedings would enable VARTA a financial restart to become competitive again in the long term,” the company said.

The implementation of the restructuring concept in the StaRUG proceedings secures jobs and protects the interests of creditors better than possible alternative scenarios, Varta said. For the company, the focus is on reducing current liabilities.

“Varta must use the StaRUG process to reduce its debt to a reasonable level in order to move forward again,” says Michael Giesswein, CRO of Varta AG. “The current debt situation is foreseeably blocking the Varta Group’s chances of positive business development. Without reducing our debt, we will not be able to make the necessary investments.”

“As a result, we will not be able to exploit market potential and take advantage of sales opportunities. Varta’s market position would deteriorate from year to year,” continues Giesswein.

The way out of this situation would be a haircut under the StaRUG procedure. A haircut is an agreement between the debtor and its creditors that cancels part of the debt in order to restore the company’s financial stability.

In the course of the StaRUG procedure, a debt cut is a possible way out. This is an agreement between the debtor and its creditors, who forgive part of the debt in order to restore the financial stability of the company.

Currently, however, the creditors are only willing to do this if a capital reduction to zero is made. This means that the existing share capital is reduced to zero and fresh capital required for the restructuring is brought in as debt or equity and debt.

All shares would lose value after a capital cut and the company would be delisted from the stock exchange. “This procedure is necessary in order to finance the further restructuring and the new start of the company,” says Varta.

In the company’s view, financial creditors and investors must also contribute to the restructuring. According to current estimates, this involves covering financial needs in “the high double-digit million euro range.”

Varta said that “constructive negotiations are currently underway with various potential investors, including a company controlled by the current indirect majority owner Michael Tojner, Dr. Ing. hc F. Porsche AG, as well as other interested parties with whom various proposals are being discussed.”