MIFA Sale Gaining Pace
SANGERHAUSEN, Germany – The sale of troubled German bike-maker MIFA Mitteldeutsche Fahrradwerke AG to India’s Hero Cycles looks likely to happen sooner rather and later thanks to an agreement by holders of the company’s 25 million euro bond to forgo an interest payment only until next week.
MIFA, which blamed accounting errors for a 15 million euro loss in the 2013 sales year that precipitated a dramatic decline in the value of its stock, announced on August 11 that it has been granted just a two-week deferment in the payout by Square One Advisors. The Munich-based agent is representing bond investors in the wake of a vote taken on July 23.
80 percent writedown
Initially requested to be extended to end-September so that executives Stefan Winegar and Hans-Peter Barth – who are shepherding the company in absence due to illness of CEO Peter Wicht – could shape a restructuring plan, the abbreviated deferment has led to press speculation of a takeover by Hero Cycles. Billed as the world’s largest bike maker, the Punjabi-based company in March agreed a 15 million euro cash injection in trade for a 47 percent stake, provided that holders agree to a writedown in value of as much as 80 percent of the bond issued in August 2013, when MIFA announced record mid-year sales figures.
Hero Cycles to acquire 90 percent of MIFA shares
According to German-language press reports, Hero Cycles appears intent on acquiring as much as 90 percent of MIFA shares, including those held both by Wicht and German financier Carsten Maschmeyer, both of whom control in excess of 20 percent of MIFA stock. Listed on the Frankfurt Stock Exchange, MIFA shares have lost more than 70 percent of their value since the 2013 loss was revealed in March.
German securities statutes
Should the deal go through at that level, Hero Cycles would be compelled by German securities statutes to offer to purchase the shares it does not own. It then could de-list the company from the exchange, a route taken by Pon Holdings of the Netherlands in January 2013 following its takeover of Germany’s Derby Cycles.
Deal backed by several German banks
According to press reports, a Hero Cycles purchase likely would see the value of the bond written down to below 10 million euro, along with a two-year extension – to seven years – of repayment terms. It is said that the deal has the backing of several German banks – including Deutsche Bank and Commerzbank – which hold both secured and unsecured MIFA debt. Speculation also is rife that the sale will win the support of investors given the alternative – a bankruptcy proceeding – would leave both debt and equity investors holding worthless paper.
Officials Wiesbaden-based Cometis, a financial communications company that represents MIFA, confirmed only the two-week deferment had been reached and that talks with Hero Cycles were ongoing. Meanwhile, officials from both companies, as well as Square One Advisors and CNC Communication, which represents Maschmeyer, could not be reached for comment.