US Hedge Fund Whitebox Backs New Restructuring Option for Varta

(Bloomberg) -- US-based hedge fund Whitebox Advisors is backing a restructuring proposal for Varta AG that would allow ordinary shareholders to provide new funds, according to people familiar with the matter, as the struggling German battery-maker negotiates with lenders to cut its debt load. 

Whitebox has a position in Varta’s €250 million ($275 million) of promissory notes — or Schuldschein debt —  and has put forward the proposal as part of a group of Schuldschein investors, the people said, asking not to be identified discussing private information. Varta stakeholders, including potential investor Porsche AG, have been in negotiations over a compromise that satisfies most parties, after a group of senior lenders and Porsche presented competing plans.

Under the Schuldschein lenders’ restructuring proposal, ordinary shareholders would be able to participate in a capital increase as part of Varta’s debt overhaul, in theory allowing them to protect their stake in the company, the people said. Other options are still under negotiation and the deal has not yet been finalized.

Spokespeople for Whitebox and Varta didn’t immediately respond to requests for comment.

Varta, majority-owned by Austrian tycoon Michael Tojner, has been forced into negotiations with creditors after a slowdown in key markets and higher financing costs pressured liquidity. The battery-maker, one of Germany’s most successful initial public offerings, has seen its stock slump after disclosing it was contemplating cutting its registered share capital to zero as part of the restructuring.

Varta’s shares bounced back somewhat in recent days after a group of shareholders noted that a more investor-friendly proposal had been submitted by an unidentified creditor group. The shareholder group argues that, without the option for ordinary equity investors to participate, the restructuring would amount to expropriation.

The company has been looking to come up with a solution to implement a so-called StaRUG. This relatively new German restructuring tool allows struggling companies to slash their debt without consent from all creditor groups. 

--With assistance from Isolde MacDonogh.

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