FRANKFURT (Reuters) - German property group IVG <IVGG.DE> reached a preliminary agreement with creditors over a plan that would virtually wipe out existing shareholders and swap 2.25 billion euros ($3 billion) in debt for equity, the company said on Saturday.
If shareholders and creditors vote in favor of the plan, the co-owner of the London Gherkin tower will have only another 2.35 billion euros in debt on its books and will not have to file for protection from creditors.
According to the plan outlined in a company statement, IVG will first reduce its capital, leaving just 1 share for every 200 existing shares. This means current shareholders will own only 0.5 percent of the company.
In the next step, creditors of a 2007 syndicated loan amounting to 1.35 billion euros and maturing at the end of September next year, called "SynLoan I", will relinquish their claims in exchange for shares equating to a majority of the company's stock.
They will also offer 140 million euros in bridge financing to IVG to cover additional funding needs until the restructuring deal closes.
A loan originally made by state-owned landesbank LBBW <LBBW.UL> for 100 million euros, now in the hands of undisclosed owners specializing in distressed debt, will also be swapped.
Together the two groups would control roughly 77 percent of the company.
Owners of a 400-million-euro convertible bond will receive about 19 percent of the company and waive their right to a put option that, if exercised, would have forced IVG to redeem the full amount of the bond by the end of March.
Owners of a separate 400-million-euro hybrid bond would also waive their financial claims.
Finally, IVG will raise cash by issuing an undisclosed amount of new shares.
As compensation for their losses, subscription rights will be offered to the hybrid bond owners, in addition to existing shareholders. The two groups would end up controlling an additional 3 percent of the company after the rights issue.
The real estate company additionally warned that a strategic review of all businesses showed it would need to book around 350 million euros in non-cash writedowns when it publishes half-year results on August 26.
(The story is refiled as IVG has corrected statement from Aug. 10 to say 100 mln euro LBBW loan will also be swapped for equity)
(Reporting by Christiaan Hetzner and Peter Dinkloh; Editing by Sonya Hepinstall and Erica Billingham)