Adler Group SA won approval to restructure €6 billion euros ($6.6 billion) of debts by a London judge, despite opposition from some of its creditors including DWS Group and Strategic Value Partners.
(Bloomberg) — Adler Group SA won approval to restructure €6 billion euros ($6.6 billion) of debts by a London judge, despite opposition from some of its creditors including DWS Group and Strategic Value Partners.
The verdict allows Adler to extend maturities of bonds due next year, borrow around €900 million and temporarily suspend interest payments. The only alternative was a default on debt later this month that would lead to an insolvency filing, Adler’s lawyers had said during a hearing earlier this month.
The court rejected last-ditch attempts by a group of Adler’s dissenting debtholders to block the restructuring. Stuck with notes maturing in 2029, lawyers for creditors also including Carval Investors and Attestor Capital said the plan benefits shareholders and investors in shorter-dated bonds.
Adler’s shares gained as much as 25% after the ruling, while bonds due in the next three years spiked. Adler Real Estate’s notes due in April rose 6.5 cents on the euro to 98.2 cents, the biggest gain since November, according to data compiled by Bloomberg.
A full judgment with reasons will be published in the coming days.
“We will review the judgment once it is made available by the Court” a spokesperson for the opposing creditors said by email. “In the meantime, we have indicated our intention to apply for permission to appeal.”
The ruling will help avoid immediate insolvency for the firm that’s seen its share price fall nearly 97% since the end of 2020. The real estate firm faced acute financial difficulties after a damaging short-seller report in 2021, a slowdown in German real estate transactions and rising rates making refinancing harder contributed. The company still needs to find a new auditor after KPMG quit last year over governance concerns.
The scheme proposed by Adler is designed to buy the company time to sell assets and gradually wind-down. The majority of its properties are scheduled to be sold by 2026 under the company’s proposal. Adler’s lawyers argued that a slow unwinding would leave bondholders better off than if the company were to commence insolvency proceedings.
Later-dated noteholders are effectively “advancing credit to the group in order to facilitate the repayment of the earlier ranking” debt, lawyers for the dissenting bondholders argued. “There is unfair and egregious treatment.”
READ MORE: Inside Adler’s Fight for Survival After Its 97% Stock Plunge
The UK case is Adler’s second attempt to push through the debt deal. A similar deal fell in Germany after Adler failed to secure the required 75% votes in each class of bondholders.
Adler then transferred the liabilities of its holding company to a newly set up UK firm and sought the court’s approval for the restructuring. A law introduced in 2020 allows a judge to override opposition by a particular creditor group — referred to as a cram down.
“With the positive court decision of the High Court in London, we may now finally implement our restructuring plan,” Stefan Kirsten, Adler’s chairman said in a statement. “At this point, we need to find an auditor for Adler to be able to present audited financial statements as well.”
The real estate company is facing separate legal proceedings in Frankfurt, where the court will examine the validity of Adler moving its liabilities to the UK.
–With assistance from Laura Malsch and Laura Benitez.
(Updates with Adler chairman’s quote in penultimate paragraph, bond pricing, other details throughout)
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