Leipzig District Court Opens Preliminary Insolvency Proceedings
On July 18, 2024, the Leipzig District Court opened preliminary insolvency proceedings for PREOS Global Office Real Estate & Technology AG (Case No.: 405 IN 1216/24). This puts the money of investors who have invested in the Preos bond at risk.
Investors can only register their claims for the insolvency table once the insolvency proceedings are formally opened. This can take several weeks. Regardless of the insolvency proceedings, investors can already have their potential claims for damages examined, according to the commercial law firm MTR Legal Rechtsanwälte, which provides advice in capital markets law, among other areas.
Preos Bond Investors Affected by Insolvency
In 2019, PREOS Global Office Real Estate & Technology AG issued a convertible bond with a five-year term and a volume of up to 300 million euros (ISIN: DE000A254NA6). Investors were supposed to receive an interest rate of 7.5% p.a. In total, investors have invested around 250 million euros in the 2019/2024 Preos bond. Following the company’s insolvency application, they now have to fear for their invested money.
The insolvency does not come as a complete surprise to investors. In 2023, they were asked to agree to a change in bond terms due to economic difficulties. This included, among other things, suspending interest payments for six months and extending the bond’s term. Additionally, the bonds were to be forcibly converted into shares. After lengthy discussions, investors eventually agreed to change the bond terms when Preos made it clear that the company did not have the liquid funds to make the interest payments due in 2024. These measures were deemed necessary to prevent impending insolvency.
Frankfurt Higher Regional Court Rejects Bond Terms Changes
Some investors holding bonds worth around 40 million euros doubted the legality of the bond’s restructuring. They feared a hidden influence of the company on voting rights, reported the Handelsblatt on June 28, 2024. The Frankfurt Higher Regional Court shared these concerns and rejected the implementation of the resolutions. According to Handelsblatt, the court saw a “deliberate circumvention of voting bans” and a “particularly serious legal violation.”
Preos Files for Insolvency
Preos predictably denied the allegations. The company’s response to the Frankfurt Higher Regional Court’s decision to reject the implementation of the bond terms changes was swift. On June 28, 2024, Preos stated that, following the court’s decision, the resolutions passed in December 2023 for the restructuring of the convertible bond could not be implemented, and the company had to file for insolvency. The company is apparently unable to make the due interest payments, reportedly between five and ten million euros. The preliminary insolvency proceedings were opened by the Leipzig District Court on July 18, 2024.
Investors can only register their claims with the insolvency administrator once the insolvency proceedings are formally opened. Investors should not expect a high insolvency quota. During the proceedings at the Frankfurt Higher Regional Court, a lawyer for Preos stated, according to Handelsblatt, that the properties were sold, and there was not much left to recover. The insolvency administrator will have to determine whether the property sales were permissible or if Preos was already insolvent at the time.
Potential Claims for Damages by Investors
As reported online by “Wirtschaftswoche” on July 18, 2024, Preos is now seeking a reorganization under an insolvency plan. Such a plan would require creditor approval, and investors would likely still face significant losses. It is also unclear what impact the insolvency will have on Publity AG, which holds a large portion of Preos AG shares.
Once possible, Preos AG bond investors can register their claims in the insolvency proceedings. They can also examine their legal options. In cases of misinformation about the bond, claims for damages against those responsible may arise. Furthermore, investment advisors and brokers may be liable for damages if they did not properly inform about the existing risks of the investment and, in particular, the risk of total loss for investors.
MTR Legal Rechtsanwälte has extensive experience in capital markets law and advises affected investors on their options.
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