Friday night IVG Bombshell

Friday night, 8 pm seems to be a good time to land a real bombshell. IVG distributed an Adhoc notice with some update information about the upcoming restructuring.

Among other stuff, the comment on potential recovery rates in a liquidation. This is the German original:

ergäbe folgende Befriedigungsquoten: ca. 96% bis ca. 100% für Objektfinanzierungen (Carve out debt), ca. 86% bis ca. 89% für den syndizierten Kredit von 2009 (Syn Loan II), ca. 46% bis ca. 55% für den syndizierten Kredit von 2007 (Syn Loan I) und ca. 27% bis ca. 41% für die Wandelanleihe. Die Gläubiger der Hybridanleihe und die Aktionäre der Gesellschaft würden in diesen Fällen voraussichtlich jeweils keine Befriedigung erhalten.

So nada/niente/rien for Hybrid and Equity and only 27%-41% for the convertible. This is significantly below the latest trade of around 58% as of today.

After all, my summary from May seems to be spot on:

the likelihood of IVG “surviving” long term in my opinion is very small or even zero. So equity and hybrid should be avoided

I am really glad that I sold out:

Overall, for the portfolio I would for the time being sell down the position at current rates and eat the loss. I am pretty sure that I am too early but as I know that I am a rather bad short term speculator, I want to play this safe.

This is by no means over yet but it doesn’t look good.

Interestingly, Third Avenue seemed to have bought into IVG earlier this year. That’s what they say in their last shareholder letter:

Our analysis determined that the IVG Convertible Bond swere most likely the “fulcrum” security in the capital structure. In other words, holders of the IVG Convertible Bonds are likely to participate in a debt-for-equity restructuring, and the subordinated securities(preferred and common) would retain little or no value. IVG Convertible Bonds mature in 2017, but holders have an option to put the bonds to the company in 2014. The Fund purchased approximately 5% of the outstanding IVG Convertible Bonds at an average cost of sixty-eight cents on the dollar. As a larger holder,we anticipate having a seat at the table with the company

Man, that sounds really stupid. Even I had found out that the “fulcrum” security were the loans. it seems to be that Marty Whitman’s successors got a little bit sloppy.

So let’s get some Popcorn and watch what will happen on Monday.


  • Absolut spannend was die nächsten Tage bringen werden….
    Bei einer Fortführung bin ich auf das Staffing gespannt. Gute, operativ agierende Personen haben mittlerweile reagiert. Somit ergibt sich für mich die Frage, ob man eine Konzern-Hülle mit geringen Perspektiven fortführt oder einen harten Cut zieht….tendiere zu Option 2…..(die etwaigen Befridigungsquoten einmal außer Acht gelassen).

    • Another interesting view was published on IVG´s Website over the weekend. I guess this was triggered by recent comments made by Aurelius who claim to own more than 30% of the outstanding covertibles. Aurelius complained that the EPA ignores that the issuer (“B.V.”) also has a direct claim against the AG. Hence, the bondholder would effectively have two claims against the AG. This would lead to a recovery ratio of 44% to 70% for the convertible. Watch out for more news coming out later today….

  • ich wuerde das anders interpretieren.

    1. erstens, ist das deren Position, um die Glaeubiger kleinzuhalten. quasi deren erster bid.

    2. zweitens ist der Wert der Verbindlichkeiten (und des EK) im going concern Fall hoeher als bei der Zerschlagung. Eine Einigung mit Glaeubigern bedeutet ja going concern und dass eben gerade nicht die angegebenen Zerschlagungswerte massgeblich sind.

    3. Der Hybrid ist im Zerschlagungsfall nichts wert, im going concern Fall aber das, was man aushandelt. Im Gegenzug fuer eine Zustimmung Restrukturierung werden die Glauebiger ein Wertaequivalent (aus Equity, sweetener, new debt) verlangen, dass zumindest ueber dem aktuellen Preis liegen sollte.

    • das Problem ist eben, dass einige der Beteiligten (Oaktree & Co) Vorteile haben wenn es zu einem möglichst harten Schnitt (insolvenz) kommt. Unter “esug” wird das schnell und für die Hybriden vmtl. sehr schmerzhaft.


    • Edit: Der Investmentcase für Oaktree und Co. liegt v.a. darin, möglichst alles “unter” Ihren Forderungen herauszudrücken. Je weniger die anderen bekommen desto mehr bleibt denen. Dessen sollte man sich im Klaren sein.

      Der Hybrid ist ein reiner Zock, keine Margin of Safety.

  • At least their CEO is still in dreamland – quite sure he´ll be the first one who´ll be kicked when the debtors took over. What really surprises me is that the collateral of syn loan I is expected to be worth only 23% to 26% of the notional, and syn loan II only 81% to 82% of the notional. Seems like some of the bankers were in dreamland, too, when they negotiated the loans.

    On the other hand, the hold-out scenario is still valid for the convertibles. The whole restructuring exercise will require much more time than expected by the incapable management of IVG. And I guess their external advisors will have a lot of time. Time is money….

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