Distressed debt: Quick update IVG convertible – insolvency plan released
As a former IVG convertible investor, I still follow what is happening there in order to learn how this “new” German bankruptcy process works.
Yesterday, IVG came out with their “insolvency plan”. Some of the detail sare:
– not surprisingly, shareholders and Hybrids get fully wiped out
– they actually plan to delist the stock
– part of the secured loans (Syn loan II) experience no hair cut at all and receive even interest
– the other part (Syn loan I, LBBW loan) AND the convertible get shares in the “NEwCo”
– The convertible holders will get 20% of NewCo which, without giving details is calculated as a 68% recovery
What I find especially interesting is the fact that the convertible still trades at around 75%:
What that means is that convertible holders think that the stock they will receive is worth a lot more than 68% even if it comes in a non-listed form and will be hard to sell.
This in fact means that in theory, under a completely “fair” insolvency proceeding, something could have been left for the Hybrid holders. Under the current insolvency regime, however it seems to be really possible to kick out subordinated holders even if the asset value would imply some recovery as the hybrid holders are not a creditor group.
For me, this doesn’t look fair. It is a clear invitation to distressed debt funds to look at German companies with significant hybrid debt, force them into bankruptcy and kick out the hybrid holders at zero.
Maybe this is also the reason why they want to delist the stock, so that the “True” recovery does not become public directly after the debt/equity swap.