Frequently Asked Questions
Who are we and what are we trying to achieve?
We are a group of bondholders of GZO AG’s June 2024 1.87% bonds (ISIN: CH0240109618) representing 6.56% of the outstanding nominal value of the bonds. On July 18, 2024, we requested a bondholder meeting to bring forward a set of proposals aimed at saving GZO AG from bankruptcy, which we believe will be the outcome of the process that the board has currently elected to undergo.
The activities of the group are being coordinated by Clearway Capital Partners ICAV, an investment fund focused on impact investing in European public markets together with the help locally of Mr. Gregor Greber, a Zurich-based entrepreneur and co-investor.
How does the composition moratorium work?
The composition moratorium under Swiss law is a procedure that is intended to be an alternative to bankruptcy and that allows distressed companies to restructure their capital while maintaining protection from their creditors.
This procedure was designed to give distressed companies time to negotiate a restructuring plan with creditors, often including a haircut, to allow them to continue operating as a going concern. The composition moratorium can be an optimal solution in situations where companies have few tangible assets and therefore little recoverable value in liquidation.
In cases such as GZO, where the company owns substantial tangible assets and where a haircut is not in the interest of creditors, the composition moratorium tends to fail. Roughly 40% of all composition moratoriums fail and result in bankruptcy.
The bar is very high for a composition agreement to be reached: two thirds of creditors (by value) must vote in favor of the agreement and one half of the creditors by number.
If you are a creditor and would like to learn more about the composition moratorium, please get in touch and we would be happy to illustrate the process in detail and answer any questions you may have.
Why is the composition moratorium wrong for GZO?
The market value of GZO’s assets exceeds the amounts due to creditors by a substantial margin. GZO owns valuable assets including CHF 75 million of real estate, an operating business that could be worth up to CHF128 million, CHF 67 million of liquid assets and a new (albeit incomplete) building that the company itself claims to be worth CHF 95 million.
Considering the significant asset backing, it is unlikely that creditors will be willing to accept a haircut (nor should they), as many alternative options exist to achieve repayment in full. Due to the high requirements for an agreement to be accepted (two-thirds of creditors by value and one half of creditors by number that must vote in favor), we are certain that the company will not reach the necessary thresholds to achieve its goal, resulting in the liquidation of the hospital.
Moreover, the prospect of potential bankruptcy weighs over the hospital and will likely adversely affect operations. The longer this uncertainty persists, the more likely it is that the value of the hospital operations deteriorates.
For this reason, we are offering a three-year extension of the bonds to ensure that the company has the necessary time to find a permanent solution that does not include a haircut while ensuring that the hospital can continue as a going concern.
What protections do creditors have under the composition moratorium?
Under the composition moratorium, all pari-passu creditors are treated equally. Accordingly, all covenants and other protections provided for by the bond prospectus or similar loan documents are not enforceable.
Holders of June 2024 1.87% bonds of the 2025 and the 2028 notes are less protected under the composition moratorium than what is provided for in the terms of their respective instruments.
If you are a creditor and would like to learn more about how our proposals protect you better than the composition moratorium, please reach out to us at contact@gzo-bondholder.ch
What are the proposals of the group of creditors?
We have made four proposals to GZO:
- An extension of the maturity of the bonds by three years to provide the company with time to find a permanent solution
- A progressively increasing interest rate to incentivize the company to achieve a timely resolution of the situation
- Securing the bonds with the company’s real estate assets
- The appointment of an additional bondholder representative
You can find detailed information here: https://gzo-bondholder.ch/en/our-proposals/ and context in our letter to bondholders that you can find here https://gzo-bondholder.ch/en/news-en/.
Why will the adoption of these proposals “save” the hospital?
We believe that the board does not fully realize the predicament that they are in. Given that there are various options available to the board to ensure that creditors are repaid in full, coupled with the substantial asset value within the company, it is highly unlikely that the board will succeed in convincing at least two-third of its creditors (by size) and half of its creditors by number to accept a haircut, particularly considering the numerous retail bondholders who expect a full repayment.
Accordingly, we believe that if our proposals are not accepted, the hospital will end up liquidated, its assets repurposed and sold.
Under such a scenario, it is likely that creditors would receive their money back over time, albeit it is a solution that is not in the best interest of the company, of its shareholders, of the local communities, of the employees and of the patients.
The adoption of our proposals will ensure that the hospital continues to operate while giving the board sufficient time to find a permanent solution.
Does the creditor group’s proposals give preference to any group of creditors?
No. Within the conditions to our proposal, we have expressly included one stating that no other debt shall be repaid during the three-year extension. This condition indirectly requires the company to ensure that the owners of the CHF10 million of notes due in 2025 are also willing to extend their maturity and we have provided the company with the indication that all creditors who rank pari-passu should receive the same treatment.
Can GZO afford the proposed increasing interest rate?
Yes. GZO currently holds CHF 67 million of liquidity on its balance sheet (which were provided to the company by its current creditors).
Furthermore, GZO’s average EBITDA over the past five years has been CHF 12.2 million and the company has a stated margin target of 8% to 12%, implying an EBITDA ranging between CHF 12.4 million to CHF18.6 million providing adequate room for the interest payments to be covered by cash flows should the company achieve its targets.
Our proposed interest rates are significantly below the current market rates and are designed to incentivize the company to act swiftly to find a permanent refinancing solution.
What are the possible long-term solutions?
We believe that there are several ways to restructure the business and refinance the bond definitively, thus permanently saving the hospital. These include (but are not limited to) a cash injection from existing shareholders or from a third party, a guarantee from current shareholders (which would allow for refinancing without any cash outlay on their behalf), a partial land sale, M&A or a combination of the options mentioned.
With our proposals, we are not trying to push for any specific option which should be decided by the Company and its shareholders, rather we are offering the necessary time to achieve the best solution.
Have we spoken about this to GZO?
Yes. We have met various stakeholders of GZO including the Chairman and Mr. Raschle and have engaged in multiple conversations with little success.
Did you have direct contact with the Sachwalter?
No, we did not meet the Sachwaltern Brigitte Umbach-Spahn and Stephan Kesselbach so far, but they signaled to be willing to meet us.
When will the bondholder meeting take place?
The bondholder meeting is scheduled for October 25th, 2024. You can find the invitation here: https://www.gzo.ch/ueber-uns/presse/details/gzo-ag-laedt-zur-versammlung-der-anleiheglaeubiger-ein.
What are the steps to register, vote and support our proposals?
We are urging all bondholders to get in touch with us. Please email us at contact@gzo-bondholder.ch or fill out the form below. We will explain the process in detail and provide you with the necessary documentation. We look forward to hearing from you.