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MIFA Calls Meeting as Rating is Withdrawn

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SANGERHAUSEN, Germany – Having failed last month to win online approval for a sought-after delay, executives at listed German maker MIFA Mitteldeutsche Fahrradwerke AG will convene a meeting of investors on July 23rd to determine the fate of an interest payment on its year-old bond issue. Meanwhile, the shadowy state of the company’s finances saw a German ratings agency suspend its evaluation of the 25 million euro security.

MIFA Calls Meeting as Rating is Withdrawn
Hero Cycles has made the bond reduction contingent on a 15 million euro cash injection into MIFA. – Photo Hero Cycles

Sparked by an unforeseen 15 million euro loss for the 2013 trading year, the request for a delay until the end of October on the interest payment due on August 12 met with lukewarm reception among holders. An online poll in early June that also asked for the appointment of a representative to approve a writedown of as much as 20 million euro in the value of the bond—issued in August 2013 and in the wake of announced record first-half profits—failed to elicit responses from the 50% of holders needed to make its results binding.

Hero condition

India’s Hero Cycles has made the reduction contingent on a 15 million euro cash injection that would see one of the world’s largest maker acquire a 47% stake in the Sangerhausen-based company. MIFA executives Stefan Winegar and Hans-Peter Barth – who are shepherding the company in the absence due to illness of CEO Peter Wicht – are seeking the delay as they craft a plan for restructuring the company’s finances.

MIFA blamed the implementation of an inventory accounting system for the errors in earnings guidance. When announced in March, the losses for 2013 produced a steep decline in the value of MIFA shares, which are listed on the Frankfurt Stock Exchange.

Investment-grade rating withdraw

While the pair are due to deliver a turnaround blueprint on October 31, the lack of information forthcoming from the executive suite led FERI Euro Rating Services to withdraw its investment-grade rating of the MIFA bond.  In a July 2013 report, issued ahead of the launch, FERI analyst Gerald Christoph Dorsch rated the bond BBB-, an indicator of MIFA’s perceived higher credit-quality.

In a press release issued on July 4, MIFA instructed bondholders to gather at the offices of Klaus Ehrich GmbH, an auditing and tax consultancy based in Sangerhausen. According to German securities law, a quorum will be reached and decisions of any votes taken made binding if 25% of holders are in attendance.

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