Investors Deal MIFA Bond Blow

SANGERHAUSEN, Germany – Executives at loss-making MIFA Mitteldeutsche Fahrradwerke AG are considering their options after an on-line vote about whether to delay an interest payment on the listed German bike maker’s 25 million euro bond failed to produce a quorum participation among holders of the debt.
MIFA’s on-line vote about whether to delay an interest payment on the listed German bike maker’s 25 million euro bond failed. – Photo Bike Europe

The company, which is attempting to sort its finances in advance of a proposed buy-in by India’s Hero Cycles, had hoped to delay the payment due August 12 until the end of October. That’s when executives Stefan Winegar and Hans-Peter Barth – who are shepherding MIFA in the absence due to illness of ceo Peter Wicht – are due to deliver a blueprint for restructuring in the wake of a 15 million euro loss for the 2013 sales year.

Operating via Dutch-based investment entity OPM Global BV, Hero Cycles in May offered a cash injection of 15 million euro in trade for a 47% stake in MIFA. However, the Indian behemoth is making the deal contingent on a writedown of as much as 20 million euro in the value of the bond issued in August 2013.

Seeking relief

The world’s largest bike maker also is seeking relief from German regulators over the requirement that buyers of at least 30% of a listed company’s stock make an offer for the remaining shares. Trading at around 7 euro when the loss was announced in March, prices for MIFA shares have trended closer to 2 euro in the ensuing months.

Bondholders were given three days to cast votes about whether to delay the interest payment and to appoint a representative to authorize its specifications. However, the vote – conducted June 10-13 – failed to draw the minimum 50% of bondholders to make its results binding and thus compelling MIFA make good its contractual obligation.

How to proceed

Officials at Cometis, the Wiesbaden-based financial public relations company that represents MIFA, said in the wake of the on-line vote that the company is working out how best to proceed. Under the German Debt Securities Act of 2009 , the guiding legislation for domestically issued bonds, the company may revisit issues in the on-line poll and others – including whether to authorize a writedown – at a meeting of bondholders.

Should such a meeting fail to attract the 50% quorum, German securities law requires financial decisions – such as delays and writedowns – taken at the so-called Adjourned Meeting that would result be approval by at least 75% of bondholders in attendance. Votes accorded to the bonds held by MIFA principals would not be eligible to vote on finance matters in an Adjourned Meeting.