Porsche agrees to provide capital in Varta restructuring deal

FRANKFURT -- German battery maker Varta says it has reached a restructuring agreement with its creditors, bringing on sports-car brand Porsche to save the ailing business.

The agreement, struck after days of intense negotiations, will reduce Varta's debt from €485 million ($534.86 million) to €200 million initially, the company said.

Varta, which makes batteries for global automotive, industrial and consumer markets, had been looking for a compromise between major shareholder Michael Tojner, creditors and Porsche to alleviate its debt and secure fresh capital.

According to the agreement, Tojner and Porsche will provide a capital injection of €60 million. A further €60 million will come from the creditors as senior secured loans, the company said, adding that a third investor could come on board later.

"We are in advanced discussions with other investors who would like to join us," Varta CEO Michael Ostermann told Reuters.

In helping with Varta's rescue, Porsche will secure access to high-performance batteries for its hybrid and electric sports cars.

The automaker also said on August 17 that it will take a majority stake in Varta's V4Drive Battery division via a capital increase mainly through a contribution in kind.

"With the planned majority takeover of V4Drive, we ... would make an important contribution to keeping key technologies in Germany," said Lutz Meschke, deputy chairman of the executive board at Porsche brand.

In July, Ostermann announced a radical pre-insolvency restructuring for Varta, which had debt it could not service after making costly investments.

"With the implementation of the measures agreed today, the group's financing and liquidity have now been sustainably stabilized and secured in the long term," said Varta CFO Marc Hundsdorf.

'Moderate' job cuts

Ostermann said there was no immediate threat of major job cuts.

"We want to grow, both with battery storage for photovoltaic systems and with button cells for Apple headphones. We are currently looking for staff there," he said.

Varta will keep all its manufacturing sites in Germany, with only "moderate" job cuts in administration. "We will put Varta back on a profitable growth path," he told Reuters.

However, existing shareholders will come away empty-handed as Varta will be taken off the stock exchange following the restructuring.

"We tried everything to get the small shareholders on board - but that is not legally possible in this situation," said Ostermann.