Restructuring concept: Baywa agrees rescue plan – first big steps

The heavily indebted Munich conglomerate Baywa is about to take the first big steps towards the hoped-for financial recovery: The company has agreed with the most important creditor banks and the two main shareholders on the roadmap for restructuring by 2027, as the board announced at the weekend.

The restructuring agreement should therefore be legally binding by the end of April 2025 at the latest, including a reorganization of financing. At the end of the third quarter, the group was almost 5.3 billion euros in debt to its creditor banks, the legacy of rapid expansion on credit over the past decade.

Capital increase of over 150 million euros

Baywa, which emerged from the cooperative movement, is the largest German agricultural trader. The group plays an important role in agriculture and food supply in the south and east of Germany. The 101-year-old company also operates as a service provider and dealer in the construction and energy sectors.

One component of the restructuring concept is the issue of new shares. The cash capital increase with subscription rights for existing Baywa shareholders is expected to bring the company 150 million euros. The details are expected to be finalized in the first quarter of 2025. In the first nine months of this year, the group posted a net loss of almost 641 million euros.

Large shareholding in Austria is sold

The expected downsizing of Baywa also begins: By the end of March, the company wants to sell its almost 48 percent stake in Raiffeisen Ware Austria (RWA), the Austrian counterpart of Baywa, for 176 million euros. So far, the companies have been cross-involved in a nested structure.

The Baywa share in RWA is now to return to Austria and be taken over by an asset management affiliate of the RWA Group. The associated contract has already been signed, but antitrust approval is still pending.

Green electricity participation could also shrink

Also up for grabs is the majority stake in a company that has become the biggest pillar in the group’s leg: Baywa re, which specializes in the planning and construction of solar and wind power plants.

According to an investor presentation, the group would have even generated positive earnings before taxes and interest in the first nine months without the green electricity business.

The parent company Baywa AG owns 51 percent of Baywa re, the minority shareholder is the Swiss investment company Energy Infrastructure Partners (EIP).

The shareholders of Baywa re are in advanced, but not yet completed, discussions about further capital strengthening, “which could lead to a change of control in favor of EIP,” the group announced in a supplementary statement. “The parties are continuing to negotiate with an open mind and are aiming for an agreement during the first quarter of 2025.”

Job cuts and sales

Baywa announced at the beginning of December that it wanted to sell significant holdings. In addition to Baywa re and RWA, the most important holdings are the New Zealand apple producer Turners & Growers and the Dutch agricultural trading group Cefetra. However, Baywa did not provide any information about the future of these two investments at the weekend.

Group has taken over

Baywa had only built up or purchased the green electricity business and the investments in Cefetra and T&G over the past decade under the aegis of the former CEO Klaus Josef Lutz – now President of the Bavarian Chamber of Industry and Commerce (BIHK). The debt from this debt-financed expansion has become a millstone for the company.

According to the original agreements with the creditor banks, a syndicated loan with a limit of up to two billion euros would have been due in September 2025. Apart from that, the rapid increase in loan interest rates since 2022, which management did not expect, led to a tripling of the annual interest payments due.

New financing contracts for the period until the hoped-for financial recovery in 2027 should be concluded by the end of April at the latest. According to Baywa, “almost all of the approximately 300 financial creditors” support the restructuring efforts.

The workforce pays the price

The price of the failed expansion strategy is by no means just the planned downsizing of the group: at the beginning of December, Baywa announced large-scale job cuts. Of the 8,000 full-time positions at the parent company Baywa AG, 1,300 are to be cut, which corresponds to 16 percent of the group’s full-time jobs in Germany.

Baywa, which is represented in 60 countries, employs over 23,000 people worldwide. The foreign workforce will also shrink due to the announced sales of parts of the company.