(Bloomberg) -- Porsche AG agreed to become a shareholder in Varta AG, providing fresh cash to the embattled German battery-maker as part of a debt-restructuring deal with lenders.
Under the plan, the maker of the electric-powered Taycan sports car and current majority owner Michael Tojner are set to each hold around 32% of the company after participating in a €60 million ($66 million) capital increase, according to a statement on Saturday. Existing lenders will hold 36% of the company via so-called value-recovery instruments.
Varta was once a high-flying stock with investors betting on its potential to profit from demand for ear buds and other tiny wireless devices. But a slowdown in key markets and increased financing costs led the company to stumble into its second debt restructuring in two years.
Under the agreement with creditors, Varta’s debt would be slashed to €200 million from €485 million. The value of its equity capital will be cut to zero and the shares delisted. To bolster liquidity, existing lenders will also provide a €60 million super senior loan due at the end of December 2027.
The overhaul, which took months to negotiate, will also see Austrian tycoon Tojner lose majority control of the company, which he first invested in through his firm Montana Tech Components AG in 2007.
Porsche had confirmed last month that it was open to taking a larger role in Varta’s restructuring. The carmaker has been looking to develop its own battery strategy to complement the plans of parent Volkswagen AG.
On Saturday, the carmaker separately announced that it will take a majority stake in V4Drive Battery GmbH, a venture that pools Varta’s business in lithium-ion cells used in the hybrid 911 Carrera GTS. Construction of a production facility in southern Germany will continue as planned, Porsche said in a statement.
“With the planned majority takeover of V4Drive, we aim to drive the company forward and would make an important contribution to keeping key technologies in Germany,” Lutz Meschke, Porsche’s chief financial officer, said in the statement.
Negotiations over Varta’s debt restructuring had sparked some division among stakeholders. Some existing equity investors had opposed the zeroing of the shares, while a group of investors in Varta’s €250 million of promissory notes argued they had been left out of discussions.
Varta said that almost all of the syndicated loan lenders and certain lenders of promissory notes had agreed to the deal. The company said it is preparing documentation to conclude the agreement “in the short term.”
The restructuring agreement would also allow for another potential shareholder to invest a further €30 million in Varta within one year of the debt restructuring procedure finalizing.
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