EkoNiva starts consolidating business in Russian jurisdiction

MOSCOW. April 8 (Interfax) - EkoNiva, Russia's leading producer of raw milk, is beginning the process of consolidating its business in Russian jurisdiction.

The agribusiness group's parent company, Germany-based Ekosem-Agrar AG has decided to restructure two issues of corporate bonds, the group said in a press release. This will enable the group's current shareholders to transfer its assets to the control of a new company in Russian jurisdiction.

In a proposal to holders of Ekosem-Agrar's ESA bond 2012/2027 (ISIN: DE000A1R0RZ5 / WKN: A1R0RZ) and ESA bond 2019/2029 (ISIN: DE000A2YNR08 / WKN: A2YNR0) on its website, the company invited them to sell and transfer outstanding bonds, including accrued interest, at a price of 300 euros per bond with face value of 1,000 euros.

Both of these bond issues are traded on the Stuttgart and Frankfurt stock exchanges. Ekosem-Agrar had only the two bond issues: 2012/2027 totaling 78 million euros and 2019-2029 totaling 100 million euros. Under the proposal to pay bondholders 30% of face value, the group will need about 53 million euros to redeem the bonds.

A meeting with bondholders is scheduled for May 2. An invitation to take part in it was published on April 8 in Germany's Federal Gazette and posted on the group's website.

e.Anleihe GmbH, the representative appointed for both corporate bonds, as well as the Noteholders' Advisory Committee constituted in 2022, "welcome the proposed measures in principle given the political situation and the development of stock market bond prices and have announced that they will examine the concept presented in more detail," the group said.

The group's management also plans to merge the German holding company with the operating business, which is based exclusively in Russia. To this end, shares held by German companies in the Russian intermediate holding (operating) companies will be sold to a Russian acquiring company. The current shareholders of Ekosem-Agrar, led by group founder and president Stefan Duerr, who is a Russian citizen, will essentially hold the shares in the acquiring company. In this case, the company is asking the noteholders to waive the repayment option in the event of a change of control.

In addition, EkoNiva shareholders are now holding talks "with potential equity investors in Russia who intend to invest up to 100 million euros in the acquiring company," the press release said. "All investors are making their investment subject to the above-mentioned restructuring of the bonds and the sale of the intermediate holding companies to a Russian company."

EkoNiva Group's revenue remained flat at about 70 billion rubles in 2023, while EBITDA fell 32-43% to 15 billion-18 billion rubles due to a sharp increase in production costs and critically low raw milk prices in the second and third quarters, according to the preliminary data of the group's consolidated unaudited financial statements to IFRS. In its positive scenario, management expects revenue and EBITDA to grow in 2024.

"This was a difficult decision for us, but we believe that the proposed sale of the bonds is a good opportunity for noteholders in view of the general conditions. In our view, the proposed restructuring and the merger of the holding company with the operating subsidiaries in Russia, from where the Group is managed anyway, are the right steps to preserve our operating business and ensure the Group's continued existence. Our bonds have been an important financial pillar in building up our business since 2012, combined with an attractive return for our noteholders," EkoNiva Group president Stefan Duerr was quoted as saying in the press release.

"With political developments still uncertain, we believe the sale of the Ekosem-Agrar AG is an attractive offer for investors to recover at least parts of their original investment," he added.

EkoNiva, which was founded by Duerr in 1994, has operations in 13 Russian regions, including Voronezh, Kaluga, Kursk, Leningrad, Moscow, Novosibirsk, Orenburg, Ryazan, Samara and Tyumen, as well as Altai Territory, Bashkortostan and Tatarstan. The group's core dairy division includes 40 modern livestock farms. The group produced 1.26 million tonnes of raw milk in 2023. EkoNiva began processing milk in 2013 and now operates four processing plants.

The group is also engaged in cattle breeding, beef farming, seed production, crop farming and organic agriculture. The group is one of the top five owners of farmland in Russia, with 630,000 hectares.