Major Indian bicycle manufacturer Hero Cycles saved beleaguered German counterpart Mifa, almost literally at the last minute. Hero agreed to take over a substantial stake just before Mifa had to repay interest on a large loan, for which it did not have the cash. Technically speaking, Mifa’s creditors agreed on a substantial reduction of capital from former big investors such as German entrepreneur Carsten Maschmeyer and long-time Mifa CEO Peter Wicht (who formerly held about a quarter each). Their share will be cut down to about 1 percent or less.
The creditors decided in favor of a reduction of their own claims from €25 million to €10 million to be repaid by 2021 instead of by 2018. The interest rate of currently 7.5 percent will be reduced to just 1 percent. In exchange for this commitment, the creditors will receive a 10 percent stake in Mifa – some of which may be augmented in the course of a capital increase.
Hero Cycles will step in with shares worth €15 million in the short-term and may become controlling shareholder with a stake of up to 89 percent. The Indian move was subject to the condition that the creditors will stand away from a large part of the reimbursement of their own €25 million loan which they had granted to Mifa. The bicycle manufacturer itself said that creditors’ consent to the rescue plan means that they still have the chance to get back more than 60 percent of their money. In contrast, probable bankruptcy if Hero Cycles had refused to come to rescue would have meant that creditors might have got back just 15 percent of the loan.
The proposed rescue plan is still subject to the consent of the creditors’ meeting expected for early September. As of now, there are no doubts that the creditors will accept the plan.