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The restructuring proposal of Adler Group SA, aimed at averting the imminent collapse of the German real estate company, was sanctioned by the High Court in London last week, despite resistance from certain bondholders. Judge Thomas Leech granted authorization for the plan after a hearing last week, during which legal representatives for Adler’s English subsidiary stated that the group would likely face insolvency proceedings by the end of April unless the proposal was approved.
During a brief hearing earlier this month, the judge stated that he would provide the rationale for approving the plan at a later time. Attorneys representing the creditors who objected to the plan stated that they would seek permission to appeal the decision. Adler, which is one of the largest landlords in Germany, is grappling with a liquidity crisis that has been sparked by a downturn in the German property market, increased energy, and construction costs due to Russia’s invasion of Ukraine, and the repercussions of the ongoing pandemic.
In 2021, research claimed that Adler’s financial statements had been artificially inflated, an accusation that was denied by Adler at that time. Lawyers representing Adler’s English subsidiary, AGPS Bondco, informed the High Court last week that Adler Real Estate AG would be unable to meet a 500-million-euro debt payment due later this month. According to court documents submitted by AGPS Bondco, Adler Group’s external debts amount to around 6.1 billion euros ($6.66 billion).
As per the restructuring plan, Adler Group will secure new funding of 938 million euros and make amendments to the terms of unsecured notes that are set to mature between 2024 and 2029. However, a group of creditors, including DWS Investment GmbH and Strategic Value Partners, who hold notes that are due to mature in 2029, have voiced opposition to the plan, asserting that they would be in a better position if Adler Group underwent formal liquidation. Despite this, Adler Group’s share price, which has experienced a significant decline of 97% since January 2021, increased by 19% following the approval of the plan.
The group’s plan includes on-lending €535 million of the Stabilization Priority Indebtedness to Adler RE and repaying a €265 million intercompany loan with Adler RE that is due on December 29, 2022. This will result in Adler RE receiving a total of €800 million from Adler Group, which will cover the repayment of its 2023s and 2024s.
Adler Group’s projections, extending until December 31, 2024, assume a total debt repayment of €1.034 billion. This includes €194 million of Adler Group debt, €840 million of Adler RE debt, as well as refinancing of €564 million of secured debt and €190 million of unsecured debt. It is assumed that the debt to be repaid by Adler Group includes a €21 million Consus loan that matured on October 1 of this year, and €120 million in Consus convertible bonds that matured on November 29.
The funding for the plan will be partially provided by €80 million of Stabilization Priority Indebtedness. It is assumed that the remaining €53 million of Adler Group debt will be utilized for loan repayments, although this information is not disclosed. Adler RE debt to be repaid will include the 2023s and 2024s, as well as an assumed €40 million of bank debt, which is not specified.
As part of the lockup agreement, Adler Group has committed to making reasonable efforts to extend the standstill of its €390 million facility and arrange a waiver or standstill on its Commerzbank €100 million facility. The original or proposed extended maturity dates for these loans have not been reported, but it is presumed that they refer to the group’s LBBW loan maturing on June 30, 2025, and the Commerzbank loan maturing on March 31, 2028
As per the management Q3’22 call, Adler RE’s €300 million notes due in 2026 will not be affected and will remain outstanding. However, Adler Group’s €102 million convertible notes due on November 23, 2023, will be refinanced, while its remaining notes will remain outstanding. Additionally, the maturity date of the 2024s will be extended by one year to July 31, 2025, as part of the consent solicitation amendments.
This story was first published in ET Realty
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