DGAP-News: SKW Stahl-Metallurgie Holding AG

Agreement on financial restructuring of SKW Metallurgy

- Speyside Equity supports the strategic development of SKW Metallurgy as shareholder

- Existing shareholders to contribute to restructuring

- Capital raise against contribution in kind planned after capital reduction

- Annual general meeting to take place on October 10, 2017

Munich (Germany), August 25, 2017. The management board of SKW Metallurgy agreed with the sector experienced financial investor Speyside Equity on a concept for the necessary and sustainable financial restructuring after intensive negotiations.

End of July 2017 Speyside Equity negotiated a cornerstone agreement with SKW's lenders on the conditions, under which the private equity company plans to take over the receivables of the syndicated loan agreement dated January 23, 2015 in the amount of 74 million Euro. The banks have made significant concessions in a double digit million Euro range. The loan agreement has a maturity date of January 31, 2018.

"The outcome of the negotiations proves that Speyside Equity believes in the prospects and the strategic positioning of our company that operationally has recovered but still suffers from am overgeared balance sheet. We appreciate Speyside Equity's willingness to materially invest into SKW's future setting the course for its further sustainable development", states Kay Michel, CEO of SKW Stahl-Metallurgie Holding AG. "Our efforts in the year of steel crises 2016 resulting in an operationally superior performance compared to many competitors are paying off."

Several incidents in the past lead to the fact, that the SKW group shoulders a too high debt burden and is massively undercapitalized. A refinancing of the company has no prospect of success. The initiation of a financial restructuring has been unavoidable and crucial.

Speyside Equity plans to provide 45 million Euro of the 74 million Euro syndicated loan agreement as non-cash contribution to the SKW group. The remaining loan is planned to be refinanced in the course of the transaction. "With this step, the equity basis would be sustainably strengthened, the risk of insolvency eliminated and thus the strategic development of the company ensured", adds Michel.

Capital reduction unavoidable for restructuring

On the annual general meeting on October 10, 2017 the shareholders need to decide on SKW's future, since restructuring contributions are expected in the form of a capital reduction. This creates the basic capital structure, which allows for the capital increase in kind by Speyside Equity.

As a second step Speyside Equity can then contribute its receivables in the form of a contribution in kind, in case the general meeting approves a contribution in kind, that by nature excludes the subscription right of the existing shareholders. Speyside Equity owns the respective receivables against SKW Metallurgy exclusively that are the subject of the contribution. The capital measure would result in a dilution to 5% of the existing shareholders. Speyside Equity has announced that they intend to file a request as of § 327a AktG (Squeeze out) shortly after the capital measure will have been executed.

An expert report of a renown consulting firm will be provided to the shareholders describing the company-value and the adequacy of the contribution in kind confirming the assessment of the company. A rejection of this restructuring measure poses the threat of total loss for the shareholders, because the continuation prognosis under insolvency law would be void and the company's existence would be at threat. Supervisory board and management board are appealing to the shareholders to agree to this incisive step which the lenders have already gone through.

"This is a hard request to the existing shareholders, which is nevertheless without alternative. Only by these means the future of the long-standing traditional company can be secured", emphasizes the chairman of the supervisory board of SKW Volker Stegmann.

Insights of the investment process

Management board and supervisory board of the SKW Stahl-Metallurgie Holding AG carried out a structured investment process since February 2017 to facilitate the financial restructuring of SKW. The global market approach of a renowned investment bank in an early stage lead to the conclusion, that the outstanding financial restructuring in the view of potential investors can only be pursued in conjunction with a capital decrease.

Alternative offers compared with Speyside Equity's offer were less attractive and they were not providing strategic opportunities. One single interested party was generally ready to make an offer, that would under certain conditions support a cash capital increase with subscription rights for the shareholders. Nevertheless, this interested party could not find an agreement with the lenders. Furthermore, the management board and the supervisory board regarded the presented conditions neither credible nor legally and economically justifiable.

Finally, the providers of the syndicated loan decided against the originally planned repayment of a part of the syndicated loan via cash capital increase with subscription rights for the shareholders and preferred the sale of the receivables to Speyside Equity with a significant discount. Management board and supervisory board of SKW support the negotiated solution, because it secures besides the inevitable financial restructuring also the refinancing and opens substantial strategic potentials especially in the North American key-market. It ensures the continuation of the SKW group subsequent to a comprehensive operational restructuring and allows the company to enlarge its competitive position in the world-market and to actively participate in the consolidation of the industry.

Contact

Thomas Schulz
Telefon: +49 171 86 86 482
E-Mail: tsc@tsc-komm.de
Internet: www.skw-steel.com

About SKW Stahl-Metallurgie Holding AG and the SKW Metallurgie Group
The SKW Metallurgie Group is a global market leader for chemical additives for hot metal desulphurization and for cored wire and other products for secondary metallurgy. The Group's products enable steel-makers to efficiently manufacture high-quality steel products. Clients include the world's leading companies in the steel industry. The SKW Metallurgie Group has more than 50 years of metallurgical know how, and currently operates in more than 40 countries. What is more, the Group is a leading supplier of Quab specialty chemicals, which are mainly used in the global production of industrial starch for the paper industry. The SKW Metallurgie Group is headquartered in Germany with production facilities in France, the US, Canada, Mexico, Brazil, South Korea, Russia, the Peoples' Republic of China and India (joint venture). Shares of SKW Stahl-Metallurgie Holding AG have been listed in Frankfurt Stock Exchange's Prime Standard since December 1, 2006; since 2011 (conversion to name shares) with ISIN DE000SKWM021.

Disclaimer

This press release may include certain forward-looking statements which are based on currently available assumptions and predictions of the SKW Metallurgie Group's management as well as on other currently available information. Various identified as well as unidentified risks and uncertainties as well as other factors may result in a deviation of actual results, financial situation, development or achievement of the company compared to the assessments made herein. SKW Stahl-Metallurgie Holding AG does not intend and assumes no liability to update such forward-looking statements and to adjust them to future events and developments.