Not all restructurings are the same
The Corporate Stabilisation and Restructuring Act (StaRUG), which has been in effect for four years, is designed to help crisis-hit companies restructure without insolvency. While this sounds promising, it has become a point of contention for free float shareholders. Leading the charge against StaRUG are the Deutsche Schutzvereinigung für Wertpapierbesitz (DSW) and the Schutzgemeinschaft der Kapitalanleger (SdK).
The main bone of contention is the use of StaRUG in the restructurings of battery manufacturer Varta and automotive supplier Leoni. Free float shareholders received no subscription rights for the new shares, thus being excluded from potential value gains following a successful restructuring, while some large shareholders benefitted.
In the case of Varta, a company owned by the previous main shareholder Michael Tojner, who shares responsibility for the company's decline, and the newly added sports car manufacturer Porsche, are providing the fresh equity.
For Leoni, Austrian entrepreneur Stefan Pierer became the sole owner, and soon sold the majority stake and the cable business for a significant profit to the Chinese company Luxshare.
Ensuring term extension
However, not all StaRUG processes result in a total loss for shareholders. In the case of Branick, the equity owners fared relatively well. The real estate company applied the restructuring law to enforce the extension of promissory note terms, which required an approval of just 75%. Without StaRUG, all promissory note creditors would have had to approve the plan.
The situation is similar with Baywa. Here, too, the goal is to bring recalcitrant creditors in line. As of now, shareholders face neither a capital reduction nor the exclusion of subscription rights for the planned issuance of new shares. Therefore, small shareholders remain on board. But they are not entirely confident in the process. Otherwise, the stock price of the heavily indebted agricultural trading group wouldn't have briefly dropped by 34% last Friday morning, before recovering again. Apparently, the bitter experiences at Leoni and Varta are still having an impact.
