Bloomberg News – Schmolz Wins Vote on Capital Hike as Liwet, Haefner Reach DealSchmolz + Bickenbach AG’s shareholders voted in favor of a capital increase to keep the company afloat after the two largest investors ended weeks of feuding over the proposal.
By Leonard Kehnscherper and Fabian Graber
(Bloomberg) — Schmolz + Bickenbach AG’s shareholders voted in favor of a capital increase to keep the company afloat after the two largest investors ended weeks of feuding over the proposal.
Almost 80% of shareholders attending an extraordinary meeting near the Swiss city of Lucerne approved the share sale plan of at least 325 million Swiss francs ($326 million), removing a key hurdle towards rescuing the company from insolvency. Liwet, an investment holding company linked to Russian billionaire Viktor Vekselberg, will own as much as 25% of the Swiss steelmaker after the capital increase, while Martin Haefner –currently the company’s second largest shareholder– will increase his stake to up to 37.5%, they said at the meeting.
The plan still needs to win the approval of regulators. Last week, the Swiss Takeover Board said it wouldn’t waive the need for a mandatory offer on all of the company’s shares as requested by Haefner. The company appealed to Finma, a separate regulator, and a final decision will be made by Dec. 9.
Industry lobby group Swissmem warned that the ruling has increased chances the company will go bankrupt, and the risk of jeopardizing 800 jobs in Switzerland and about 10,000 globally. Schmolz’s shares and bond prices fell this year amid weakening demand from carmakers. The company will be in “critical” condition and in need of a tough restructuring even if the capital increase goes through, Schmolz’s Chairman Jens Alder told investors at the meeting.
A so-called change of control clause in the company’s 350 million euros ($388 million) of bonds would be triggered if Haefner succeeded in raising his stake to more than 33.3%, allowing bondholders to redeem their principal from the company. “Repaying the notes would be a great gift to bondholders but not really reasonable for the company,” said Marc Pierron, an analyst at Spread Research. Haefner would offer bridge financing to the company in case of early bond repayment, he said at the meeting.
Schmolz + Bickenbach is not in danger of immediate collapse and has enough money to pay its 10,000 employees through December, company spokesman Ulrich Steiner told a newspaper on Sunday. The company is generating a decent amount of cash and has “no immediate funding needs“ as its banks waived certain conditions in their loan agreements, according to analysts at Lucror Analytics.
The Swiss company suspended its stock from trading on Monday until further notice. Bonds reversed earlier losses and are indicated at 80.5 cents on the euro in late trading on Monday, according to data compiled by Bloomberg.