Adler reaches agreement with bondholder group on amendment of note terms and provision of secured debt financing

• Lock-Up agreement signed with bondholders, representing approximately 45% of all unsecured non-convertible notes issued by Adler Group S.A. (the “Notes”), provides for support in changing the terms and conditions of the various Notes issued by Adler Group
• Financing commitments of up to EUR 937.5 million to stabilize operations and capital structure (commitments are subject to certain conditions, including successful implementation of changes to the terms and conditions of the Notes)
• Changes to the terms and conditions of the Notes are expected to take effect during the first quarter of 2023

Luxembourg, 25 November 2022 - Following extensive negotiations with a group of bondholders and their legal and financial advisors, Adler Group S.A. (“Adler Group”) as well as its subsidiaries, ADLER Real Estate AG (“ADLER RE”) and Consus Real Estate AG (“Consus” and together with ADLER RE and Adler Group, the “Adler group of companies”), have today entered into an agreement (the “Lock-Up Agreement”) with the members of the Steering Committee of an ad-hoc group of holders of its Notes (the “Bondholders”) supporting the stabilization of the Adler group of companies to effect an amendment of the terms and conditions of the Notes. The 2023 convertible notes of Adler Group are not subject to the agreement.

Concurrently with the conclusion of the Lock-Up Agreement, the Adler Group has also entered into a commitment letter (the “Commitment Letter”) with the members of the Steering Committee, in which they commit to provide the Adler group of companies with up to EUR 937.5 million of new funding to stabilize the Adler group of companies (the “New Funding”). The provision of the New Funding is subject to a positive restructuring opinion, an amendment of the bond terms and conditions, the provision of the agreed collateral and other customary conditions. Other bondholders will also be given the opportunity to participate in the New Funding, which will be raised in the form of bonds to be subscribed for by the participating bondholders, with the relevant bond proceeds to be on-lent to Adler Group and certain of its subsidiaries.

Adler Group is appreciative of the efforts of the Steering Committee in enabling this important milestone to be achieved.

“In the past few months, we have had very intensive and constructive talks with our bondholders, in always fair negotiations and characterized by mutual respect. My colleagues and I are very grateful for this and above all for the result,” says Thierry Beaudemoulin, Member of the Board of Directors and CEO of the Adler Group.

Adler Group has been advised by PJT Partners as financial and White & Case LLP as legal advisor. The Steering Committee has been advised by Houlihan Lokey as financial and Hengeler Mueller as legal advisor.

Lock-Up Agreement and proposed changes to the Notes

Under the terms of the Lock-Up Agreement and subject to certain conditions, Adler Group has agreed to commence a consent solicitation and, if necessary, alternative implementation proceedings to amend the terms and conditions of the Notes.

The Lock-Up Agreement includes, among other things, the following undertaking of the Bondholders:

• to facilitate the proposed changes of the terms and conditions of the Notes by timely voting in favor thereof, including through the consent solicitation and, if necessary, alternative implementation routes, in the event that, the consent solicitation is not successful;
• to vote in favor of changes to ADLER RE’s outstanding notes due 2024 and 2026 in order to facilitate those notes becoming secured and ADLER RE providing security for certain payment-in-kind interest; and
• not to transfer, assign or sell any of their locked-up Notes and not to take any enforcement action for the term of the Lock-Up Agreement.

Other bondholders that intend to support the implementation proceedings can accede to the Lock-Up Agreement. The proposed changes to the Notes include in particular:

• a coupon uplift of 2.75%-points, whereby payment of all accrued interest since the last respective interest payment date prior to the effective date shall be deferred until 31 July 2025 and interest shall be capitalized until that date;
• amendment of the reporting covenant pursuant to which Adler Group’s audited consolidated financial statements for the fiscal year ending 31 December 2022 can be published until 31 December 2023;
• obligation of Adler Group not to declare or pay any dividend or make any other payment or distribution to any of its shareholders;
• amendment of the negative pledge covenant which allows for security on specified other indebtedness;
• amendment of the change of control threshold from 50% to 33.3%;
• inclusion of a financial maintenance covenant tested from 31 December 2024 pursuant to which a maintenance loan-to-value ratio of 87.5% until end of 2025 and 85% thereafter has to be complied with;
• permission to incur additional financial indebtedness in order to refinance existing financial indebtedness;
• guarantees from certain subsidiaries of Adler Group and security package pursuant to which all Notes will be secured, including security over the shares of a newly incorporated Luxembourg entity that will hold most of Adler Group’s assets;
• extension of the maturity of the Notes due on 26 July 2024 (the “2024 Notes”) to 31 July 2025;
• the Notes will be subject to the terms of the new intercreditor agreement, pursuant to which the New Funding will rank first, the 2024 Notes, convertible notes and Schuldscheine of Adler Group will rank second and the remaining Notes will rank third; and
• a 25 basis point fee will be payable to bondholders who participate in the voting.

Commitment Letter

Under the terms of the Commitment Letter, certain Bondholders have committed to provide up to EUR 937.5 million senior secured loans subject to a positive restructuring opinion, an amendment of the bond terms and conditions, the provision of the agreed collateral and other customary conditions. Key terms of the Commitment Letter include:

• the facilities accrue payment-in-kind interest at a rate of 12.5% per annum, be issued at an Original Issue Discount of 1% and will be allocated a separable Contingent Value Right instrument entitling holders to 25% of the equity value of Adler Group and mature on 30 June 2025;
• the secured Contingent Value Right entitles the holder to subscribe for 25% of the shares in the company at a zero strike price and, in the event the company has not delivered shares within six years after utilization of the New Funding, such equity instrument will be settled in cash;
• the New Funding will stabilize the Adler group of companies including the refinancing of financial liabilities of Adler Group, ADLER RE, Consus and its respective subsidiaries; in particular, the purpose of the New Funding includes the repayment of the Adler RE 2023 and 2024 notes;
• Fee of 1% for those bondholders who confirm their pro-rata allocation in the New Money by 2 December 2022; and
• Adler Group and certain of its subsidiaries will guarantee certain of the obligations under the New Funding and provide collateral on a senior secured basis.

The maturity of the loan granted by ADLER RE to the Adler Group will be extended to 25 April 2023 and it will be secured in line with customary market practice. The interest rate will be increased.

ADLER RE has also undertaken to seek to amend the terms and conditions of its bonds falling due in 2024 and 2026, respectively to allow such bonds and the payment-in-kind accruing on the New Funding which is passed on to ADLER RE in connection with the Commitment Letter to be secured.

Stefan Kirsten: "Stabilization of the Adler group of companies offers secure perspective"

“The Adler group of companies are caught in a perfect storm, but we managed. In view of the negative developments on the capital and real estate markets in recent months and partly because of our self-induced crisis of confidence, this negotiation result was not an easy undertaking. I am grateful that over the last months our management, with excellent advisor help, has managed to stabilize the group through the transaction with the core of our bondholders. That is another big step forward to give Adler a future. I am confident that we can also successfully take the remaining actions and offer the Adler group of companies and its stakeholders, above all customers and employees, a secure perspective,” says Prof. Dr. A. Stefan Kirsten, Chairman of the Board of Directors of Adler Group S.A.

Corporate Governance

In the near future, Adler Group will strengthen its Senior Management with a Chief Restructuring Officer. Additionally, Adler Group intends to propose, and recommend to its shareholders, the increase of its Board of Directors by one additional non-executive director with extensive financial expertise to support the financial stabilization process.

Next Steps

Adler Group will shortly launch a consent solicitation process to effect certain amendments to the terms and conditions of the Notes. Related announcements will be provided to bondholders in due course. Adler Group intends that the changes to the terms and conditions of Adler Group’s senior unsecured notes take effect during the first quarter of 2023, subject to bondholder consent.

Cleansing Materials

Adler Group has made available a cleansing presentation which includes a financial update and additional information on its website:

https://www.adler-group.com/en/investors/publications/other-publications

Further Information

Institutional investors may contact PJT Partners (Attention Tom Campbell, Jamie Bolden, Jakob Schrandt Email: [email protected]) as soon as possible, financial advisor to Adler Group, Houlihan Lokey ([email protected]), or the Calculation Agent (Kroll Issuer Services Limited, Attention: Paul Kamminga, Arlind Bytyqi, Email: [email protected], Website: https://deals.is.kroll.com/adler).

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