Publishing of the proposal for Stockmann plc’s restructuring programme
The company’s business operations can be restored by focusing on core business and its strong development
STOCKMANN plc, Insider information 14.12.2020 at 8:45 EET
The administrator of Stockmann plc’s (the “company”) restructuring proceedings, Attorney Jyrki Tähtinen, filed a proposal for the restructuring programme for the company with the Helsinki District Court on 14 December 2020. Both the company and the administrator are confident that the measures described in the restructuring programme can be used to restore the company’s business and the prerequisites for a profitable continuation of business exist.
The restructuring programme is based on the continuation of Stockmann’s department store operations, the sale and lease-back of the department store properties located in Helsinki, Tallinn and Riga and the continuation of Lindex’s business operations under the ownership of the Stockmann Group.
The programme is supported by the company’s largest creditors, the committee of creditors and the largest shareholders (representing 45.3% of shares and 62.6% of votes) as well as the company’s Board of Directors and management.
In accordance with the draft restructuring programme the company has EUR 433.5 million in secured restructuring debt, EUR 195.7 million in unsecured restructuring debt and EUR 108.1 million in hybrid bond debt, totalling EUR 736.9 million. The unsecured restructuring debt consists of EUR 5.5 million in public law debt, EUR 53.5 million in commercial paper debt, EUR 45.6 million in account payable and other debt, EUR 81.7 million in intra-group liabilities and EUR 9.5 million in damages claim debt.
The key contents of the proposal for the restructuring programme are as follows:
- The restructuring programme is based on the company continuing its department store operations and online sales at department stores located in Finland and in the Baltics. The duration of the programme is eight years. The company’s sharpened strategy responds to the changes in the operating environment and consumer behaviour by investing in customer relationships and loyalty, enhancing the customer experience in all channels, fostering a customer-centric culture, and focusing on profitable business operations.
- Lindex’s operations will continue under the ownership of the Stockmann Group, and its cash flows contribute to cover payment obligations disclosed in the restructuring programme.
- As part of the restructuring programme, the company will sell the real estate assets it owns in Helsinki, Tallinn and Riga. The price received for the realisation of the company’s real estate assets will primarily be used to pay secured debts.
- As of the date on which the draft structuring programme was filed, the company has negotiated new market-based lease agreements containing smaller premises than in the previous lease agreements at Jumbo shopping centre in Vantaa, Turku department store, Tampere department store, Tapiola department store in Espoo and office space in Pitäjänmäki, Helsinki. The negotiations concerning the department store lease agreement at ITIS shopping centre in Helsinki are continuing.
- The company is not planning on executing material reductions in personnel as part of the restructuring programme. The company’s need for employees is, however, assessed as part of the business on a regular basis. The company currently has a sufficient number of employees.
- Altogether 20% of unsecured debts will be cut while reserving the creditors the opportunity to convert this 20% share of the restructuring debt into the company’s series B shares before any cuts are made. A repayment schedule disclosed in the draft restructuring programme has been prepared for the remaining 80%. The cut 20% will be converted, if the relevant creditor so wishes, into the company’s series B shares in a share issue decided upon by the general meeting that will be held immediately after the restructuring programme has been certified by the District Court. The proposed exchange rate is the volume weighted average price of the series B share between 8 April and 27 November 2020, i.e. EUR 0,9106. If a creditor does not wish to have 20% of its restructuring debt converted into the company’s series B shares, the said 20% share of the restructuring debt will be cut permanently.
- Efforts have been made to build some flexibility into the restructuring programme by converting some of the unsecured debts into the company’s series B shares. The remainder of the unsecured restructuring debt is subject to a repayment schedule that has been prepared in accordance with the Restructuring Act. Unsecured creditors can exchange their receivable under the repayment schedule into secured notes issued by the company where the principal will be paid off as a lump-sum payment after five (5) years have elapsed from the issue. In addition to offering a different risk profile, opting for the secured notes will enable unsecured creditors to sell this financial instrument on the market. Insofar as the company is concerned, the different maturity profile of the secured notes will provide flexibility to the first few years of the restructuring programme. The restructuring programme includes a provision stating that the company is not subject to any obligation to make additional payments to its creditors.
- The administrator has decided, pursuant to Section 18(2)(4) of the Restructuring Act, to authorise the company to pay all small-scale creditors their entire receivable if it does not exceed EUR 5 000. As a result of this decision, the company has paid the receivables of more than 400 creditors in November and early December 2020. As such, the company has repaid altogether EUR 0.7 million in small-scale liabilities by 10 December 2020.
- Altogether 50% of the hybrid bond loan liabilities will be cut and the remaining 50% converted into the company’s series B shares at the proposed exchange rate in connection with the same share issue where the conversion of unsecured debts will take place. If a creditor does not wish to have the uncut 50% of its receivable converted, this share will also be cut.
- The EUR 81.7 million in intra-group liabilities will be considered secondary vis-à-vis the payments made pursuant to the restructuring programme’s repayment schedule during the implementation of the restructuring programme. As such, no payments can be made towards these liabilities until all payments payable pursuant to the repayment schedule have been made in full. The intra-group liabilities will not be cut.
- The company’s A and B share series will be combined in the General Meeting that will be held immediately after the restructuring programme has been certified by the District Court so that each one (1) A share will entitle to receive 1.1 B shares. The combination will improve the liquidity of the share and the company’s ability to secure financing from the market.
- If all conversion rights are exercised to the fullest extent, the company ownership will be divided as follows: current shareholders 46.9%, unsecured creditors 16.1% and hybrid bond holders 37.0%.
- The company’s operative business had become profitable before the coronavirus pandemic began. The company has been able to cover new payment obligations that have arisen during the restructuring proceedings. Based on the financial projections that are included in the restructuring programme, the company is estimated to be capable of making the payments listed in the payment schedule.
- Both the company and the administrator believe that the company will be successful in implementing its new and sharpened business strategy and in completing the restructuring programme.
“We would like to thank the creditors, the administrator and the other stakeholders of the company for all of their efforts. We believe that the solutions proposed in the draft restructuring programme will enable us to achieve the best possible outcome for all parties involved. The company’s shareholders, Board of Directors and management made the responsible decision when they decided to apply for company restructuring. Together with the other measures that have already been taken – such as adjusting cost levels, adopting a new business strategy, rationalising processes and implementing several other operative measures – the restructuring will ensure that Stockmann has a future as a pioneer in the fields of fashion, home goods and beauty products. The restructuring programme will also enable Stockmann to make the investments planned for 2021–2028, which are necessary for the development of the company.
I would especially like to thank Stockmann’s customers and employees. Our customers have continued to support us through the twists and turns of this unusual year, which shows in the group’s improved operating profits and strong cash assets in the third quarter. The company’s management and employees have worked tirelessly to update the company’s business strategy and to develop a unique product range and customer service experience. Another intensive joint effort has been the launching of the renewed Stockmann online store in October,” says Stockmann plc’s CEO Jari Latvanen.
The proposal for the restructuring programme will be made available in Finnish on the company’s website on the address http://www.stockmanngroup.com/en/corporate-restructuring, and an unofficial English translation will be added when it is ready.
A press briefing in Finnish will be held on Monday 14 December 2020 at 10:30 Finnish time as a live webcast that can be followed from this link. The company’s CEO Jari Latvanen, the Chairman of the Board Lauri Ratia and the administrator for the corporate restructuring proceedings, Attorney Jyrki Tähtinen will participate in the webcast. The company’s CFO Pekka Vähähyyppä will also be present.
Lauri Ratia, Chairman of the Board of Directors, Stockmann plc, tel. +358 50 2922
Jari Latvanen, CEO, Stockmann plc, tel. +358 9 121 5606
Jyrki Tähtinen, Attorney, Borenius Attorneys Ltd, tel. +358 400 406509