Fortenova Group shareholders approve bond refinancing

Fortenova Group shareholders have approved the refinancing of a bond in the amount of 1.1 to 1.2 billion euros with the majority creditor, investment firm HPS Investment Partners, Fortenova reported on Tuesday.

– Fortenova Group shareholders at today’s depositary receipt holders’ meeting accepted the proposal of Fortenova Group to refinance the existing bond in the amount of 1.1 to 1.2 billion euros with the current majority creditor of the group, investment firm HPS Investment Partners, with nearly 98 percent of those voting in favor – Fortenova’s statement said.

– After significant efforts were made to find a way to finance with banks and bond markets, the management of Fortenova Group ultimately decided to enter into a new short-term financial arrangement for the period until November 29, 2024, with HPS, the existing leading non-sanctioned creditor, which the depositary receipt holders supported today with a large majority of votes for this proposal – it added.

The terms of the new financing for the entire current amount of debt on the bond offered by HPS in terms of margin will remain the same as those of the current bond.

Additional terms of the new bond, primarily as a result of the participation of sanctioned individuals in the capital structure of the Group, which has limited financing options, include a discount (so-called Original Issue Discount) of 6.75 percent of the amount on which the bond will be issued, Fortenova said. They explain that this cost is the price of increased risk due to sanctioned co-ownership and the inability of the market to engage in refinancing a group that has Russian sanctioned co-owners.

They note that such a cost is also the price that all shareholders of the company pay due to the existence of sanctioned co-owners.

– The short-term nature of the 15-month loan is the last opportunity for the group to use this time to ensure that sanctioned individuals cease to be co-owners, which is a prerequisite for the group to be able to refinance in the money market in that short period – Fortenova Group warns.

After two unsuccessful attempts by Sberbank to sell its stake in Fortenova Group, the sanctioned ownership in the company has become increasingly toxic, preventing the company from accessing international banks and financial markets for refinancing the bond maturing in September this year.

Fortenova Group has engaged an investment bank (Lazard) to conduct the process of potential sale of 100 percent of the shares in Fortenova Group MidCo B.V., a Dutch company that owns Fortenova Group d.d. However, due to the sanctioned ownership stake, none of the potentially interested parties submitted a non-binding offer, and some of the interested parties clearly indicated that the fact that the current capital structure contains sanctioned co-owners represents an insurmountable obstacle to considering submitting any offer.

Regarding the operational performance of Fortenova Group, preliminary unaudited results for 2022 showed that the company achieved total revenues exceeding 5.2 billion euros, operating profit exceeding 470 million euros, and adjusted operating profit exceeding 300 million euros. The Group’s net debt amounts to 1.1 billion euros with a net debt to adjusted operating profit ratio of 3.5 times and liquidity in accounts exceeding 280 million euros.