September 23, 2020

DIA will pay 2 million to former CEO and prepares for the debt swap scenario

The DIA group will take to the shareholders’ meeting to pay 2 million euros to the former CEO of the company Karl-Heinz Holland for his resignation, as well as a series of changes that will allow the board to approve a debt swap quickly, if finally, this alternative is chosen.

This is clear from the documentation that accompanies the call for a meeting on July 31, released this Friday, and which provides details on the proposals of the board of directors.

Among the 16 items on the agenda is “approving the payment of a gross amount of 2 million euros to Karl-Heinz Holland”, for the “mutually agreed” termination of his contract, which became effective May 20 after a year in office.

There is also a request from the council to have the power to make debt swaps, launch capital increases or issue warrants without the need to convene an extraordinary meeting, so that, if necessary, they are executed in the most agile way possible.

In this way, the company is preparing for a hypothetical debt swap scenario, an option that it has recognized that it is studying to extend the maturity of the line of 300 million euros in bonds, which expires in April 2021.

At the meeting, a vote will be taken to authorize the board to offer “bonds, bonds and other debt securities exchangeable for shares”, for a maximum amount of 480 million euros.

“The issuance of securities convertible and / or exchangeable in shares constitutes one of the instruments for financing companies (…) These securities have the advantage of offering the investor the option of transforming their credits into shares, obtaining a potential return superior “, they have defended from the council.

Analysts and investors are still pending on whether DIA executes said operation or not; Moody’s rating agency has already warned that it would imply suspension of payments (“default”) under its methodology.

The managers of the firm have pointed out that with this point it is intended “to provide the administration of society with the margin of maneuver” that this type of action requires, since “often the success” of these initiatives depends on being able to undertake them “quickly , without the delays and costs that comes with the convening and holding “of another extraordinary meeting.

Also included on the agenda is the proposal that the board can launch a capital increase of up to 33.39 million euros, equivalent to half the capital of DIA.

In this case, a clause is attached that allows “the total or partial exclusion of the pre-emptive subscription rights of the shareholders when the interest of the company so requires”, although limited to increases of up to 13.36 million euros (equivalent to 20% of its share capital).

The board justifies its option on the grounds that this exclusion “normally allows a relative reduction in the financial cost and costs associated with the operation” and facilitates greater agility and speed, to “take advantage of the times when market conditions are more favorable. ”

The supermarket chain is controlled by Russian tycoon Mikhail Fridman through the LetterOne company, with a 74.8% stake, which means that the approval of all points on the board is considered to be safe.


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