February 24, 2014 / 1:41 PM / in 4 years

UPDATE 1-"Gherkin" tower owner IVG to swap debt for equity

* IVG submits insolvency plan to Bonn court

* Creditors of two loans and a bond to get 100 pct ownership

* Hybrid bondholder, equity investors to get nothing

* Shares down 62 percent

FRANKFURT, Feb 24 (Reuters) - Germany’s IVG Immobilien , the co-owner of London’s landmark “Gherkin” tower brought low by debts and cost over-runs, has proposed a debt-for-equity swap that will put the real estate firm in the hands of its creditors.

IVG, which owns the Gherkin tower with Evans Randall Ltd, sought protection from creditors in August after failing to reach an agreement over the restructuring of its debt and on Monday filed an insolvency plan to a court in Bonn, Germany.

One of Germany’s best known real estate firms, IVG amassed over 4 billion euros ($5.5 billion) in debt during a rapid expansion when it financed a business and hotel complex located at Frankfurt airport called “The Squaire” that suffered from cost over-runs.

It was also hit by a growing unwillingness among European banks to provide new loans, a consequence of a continent-wide credit crunch, and new regulations forcing lenders to cut their exposure to property.

Under its proposal which must be approved by the court, IVG will reduce its capital to nil and then issue new shares that some of its creditors can take up in exchange for outstanding debt. That way, the creditors will get back at least 60 percent of their investment, while equity investors will lose their holdings.

Following the debt-for-equity swap, IVG will be split into three separate businesses overseeing its real estate operations, its institutional funds unit and its gas storage business.

“Management is convinced that it has worked out a concept that enables a complete reorganisation of IVG and creates a sustainable structure,” IVG Chief Executive Wolfgang Schaefers said in a statement.

Under the plan, the creditors of a syndicated loan totalling 1.35 billion euros and a 100-million-euro loan originally extended by LBBW will end up with 80 percent of IVG’s stock, and holders of a 400-million-euro convertible bond will have the remaining 20 percent.

Another syndicated loan worth 1.05 billion euros will be deferred, and the owners of a 400-million-euro hybrid bond will waive their financial claims.

IVG’s stock, which has lost 97 percent of its value over the past year, will be delisted as a result of the capital reduction. It was down by 62 percent at 0.03 euros by 1252 GMT.

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