Restructuring Delays for Baywa Amidst Billion-Euro Debt

The restructuring process for Baywa, a Munich-based conglomerate grappling with significant debt, is set to take longer than initially anticipated. The company has announced that its recovery timeline has been extended by one year, pushing completion to the end of 2028 instead of the previously expected 2027.

Baywa is currently burdened with a debt load exceeding four billion euros, primarily stemming from its renewable energy subsidiary, Baywa r.e. This subsidiary is co-managed with Swiss investor Energy Infrastructure Partners (EIP), which is undertaking a capital increase to stabilize the financial footing of Baywa r.e. As a result, Baywa AG's ownership share in the subsidiary will decrease from 51% to 35%. Additionally, Baywa AG will forego 350 million euros in loans it had extended to its subsidiary.

Despite the delay, Baywa's management remains optimistic about the company's future viability. The restructuring plan aims to relieve the parent company of the financial burdens associated with its subsidiary, as Baywa r.e. and its debts will no longer appear on Baywa AG's balance sheet. However, this move will also significantly diminish the equity position of Baywa AG, necessitating a shareholder meeting due to losses exceeding half of its initial capital.

Compounding the challenges, a major creditor of the conglomerate has expressed reluctance to endorse the restructuring proposal. Consequently, Baywa is considering initiating proceedings under the German Act on the Stabilization and Restructuring Framework (StaRUG), which is designed to assist companies in distress without resorting to bankruptcy. This legislative framework allows firms to bypass opposition from individual creditors, although the adjustments to the restructuring strategy will likely delay the commencement of StaRUG proceedings.

Financial woes for Baywa have been stark, as indicated by a reported net loss of nearly 641 million euros in the first nine months of 2024. The root of the financial crisis lies in a misguided strategy of expansion financed through debt over the past decade. The company plans to unwind this strategy by divesting foreign investments acquired through credit financing.

The restructuring will also have repercussions on the workforce. In December, Baywa announced significant job cuts, planning to eliminate 1,300 full-time positions--approximately 16% of its German workforce of 8,000 employees. As a historical entity that emerged from the cooperative movement, Baywa is the largest agricultural trader in Germany, playing a crucial role in the agricultural and food supply sectors in the southern and eastern regions of the country.