DF Deutsche Forfait lacks quorum in vote to restructure bonds due 2020

By Susanna Moon

Chicago, Jan. 23 – DF Deutsche Forfait AG said it failed to get the participation needed for its planned restructuring at the meeting held Jan. 20 for holders of its 2013/2020 corporate bonds.

Bondholders representing €11.76 million, or 39.2%, of the total bonds voted between Jan. 20 and Jan. 22, which fell short of the 50% threshold needed to meet quorum, according to a company notice.

Of those who voted, 98.3% of holders approved the restructuring.

A second bondholder meeting will be set for mid-February, the company said.

As part of a restructuring, the company said it is seeking holder approval to reduce the coupon to 2% from 7.875% in exchange for a payment.

In return, the company is proposing to amend the note terms so that bondholders are granted options to acquire shares in the company.

The options can give bondholders a chance to recoup the interest rate cut if the shares trade at a premium to their strike price, according to the press release.

Holders exercising their options will be entitled to acquire between 100 and 113 new shares at a strike price of €1.25 per share for each €1,000 principal amount.

These option rights are to be inseparably tied to the 2013/2020 bond issues, the press release said.

The company’s shares closed at €1.28 (ETR: DE6) on Jan. 22.

The exact number of options per €1,000 of bonds will depend on whether collateral will have to be provided to the lending banks. If the negotiations with the banks arrive at this result, the bondholders will get a higher number of options in order to ensure economically equal treatment of all creditors, the company said.

“The proposed reduction of funding costs and the strengthening of the company’s equity base are vital prerequisites for maintaining the company’s going-concern status,” according to another press release.

More details

At a shareholder meeting on Jan. 23, those representing more than 99% of the capital represented at the meeting approved the restructuring measures. About 41% of the shares were represented at the meeting.

Shareholders approved increasing the company’s share capital through the issue of up to 6.8 million registered shares as well as the issue of options to existing bonds through the issue of up to 3.39 million registered shares with a majority of 99.8% each of the share capital represented at the meeting.

Bondholders could vote in writing on the restructuring of the 2013/2020 bonds through the end of Jan. 23.

“On the one hand, we need a participation rate of at least 50% of the bond amount to get a quorum; on the other hand, the approval of 75% of the participating bond amount for the planned restructuring of the bond is a precondition for all further steps such as the planned equity measures and the interest rate cut by the lending banks,” Frank Hock, the company’s chief financial officer, said in the press release.

According to the company, banks have vowed, subject to approval, to continue to make credit available and not claim any collateral, which means that the bondholders and the banks will continue to rank equally.

This is also an important claim from some of the bondholders, the company said. Klaus Nieding, attorney and the designated joint representative of the bondholders, intends to make the implementation of the bondholders’ resolutions dependent on a binding approval of unsecured credit in the volume of €37 million with a term at least until Dec. 31, 2016.

“The equity measures are also urgently required to restore the operational capacity of the company, which posted negative equity due to the high losses incurred as a result of its listing on the OFAC sanctions list,” the company said.

Hock added, “The resolutions proposed to the bondholders are clearly aimed at reducing the company’s interest expenses in order to steer the company into calmer waters while at the same time preserving 100% of its capital. In return for the interest waiver, we offer an attractive compensation in the form of option rights to acquire DF shares.”

Based on a restructuring report, the company cannot be restructured without the interest rate cuts because it would be unable to generate a sustainable return, the release noted.

Deutsche Forfait is Koeln, Germany-based company engaged in the non-recourse purchase and sale of receivables as well as the acceptance of risks through purchasing commitments.

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