Conversion of Bonds and Investor Risks
Investors who have invested in bonds of the 7×7 group may be concerned about their invested money due to recent developments. Issues with repayments, extensions of maturity, “conversion” of the bond into subordinated loans, and the planned takeover by a newly formed cooperative are likely to cause unrest. Investors must question whether they have indeed invested their money securely or if they face significant financial losses.
The developments in the bonds of the 7×7 group are alarming. Both the bond 2013/2023 (ISIN: DE000A1TNGS8) of 7×7 Invest AG and the bond 7×7 Sachwerte Deutschland I GmbH & Co. KG (ISIN: DE000A169K35) already faced repayment issues in 2023, and eventually, investors agreed to an extension of maturity. The debenture of 7×7 Energiewerte Deutschland II GmbH & Co. KG (ISIN: DE000A2GSF90) is traded on the Frankfurt Stock Exchange and has significantly lost value. Recently, the company changed its name to Energiewerte Bau GmbH & Co. KG and relocated its headquarters from Bonn to Dillenburg.
7×7 Presents Purchase and Takeover Offers
At the beginning of the year, the 7×7 group withdrew all bonds and presented the investors with purchase and takeover offers with the option of continuation as a loan. In a letter to bondholders, it is stated that a long-planned refinancing of the tangible asset projects can now take place, and a cooperative, Sieben Werte eG, is taking over control.
Investors who had previously invested in the construction of real estate or solar parks should receive a purchase and acquisition offer. This included the option of continuation as a loan on the same terms or conversion into a profit participation certificate of the property owner or the solar park owner. Outstanding interest payments should be made directly by the issuer.
Conversion into Subordinated Loans?
According to research by MTR Legal Rechtsanwälte, the conversion of the debenture into a loan is specifically a conversion into subordinated loans. At least, this follows from further correspondence from the 7×7 Energiewerte Deutschland II GmbH & Co. KG. Since spring 2024, only subordinated loans have been discussed. This makes it a highly risky investment for the investors, according to the business law firm MTR Legal Rechtsanwälte, which has been advising damaged investors in banking and capital market law for many years.
Subordinated Loans Extremely Risky for Investors
Subordinated loans are so risky for investors because their claims are ranked behind all other creditors. Particularly in the event of insolvency, investors risk being left empty-handed and suffering a total loss of their invested money. Due to the agreed subordination, investors cannot assert their claims against the issuer as soon as doing so could trigger or even threaten the issuer’s insolvency.
By accepting the purchase offer, investors in the 7×7 bonds agreed to a buyback. However, because the purchase price was immediately recorded as a loan, they did not receive any money. At least with a subordinated loan, there is a risk that investors will continue to receive no payments. Therefore, it is important to check whether subordination was effectively agreed. This is often not the case if the subordination clauses are opaque and unclear to the investor.
Investors’ Claims for Damages
Investors in the bonds may have also incurred claims for damages. They are entitled to be informed of all significant aspects that may be relevant to their investment decision. This, of course, includes information about the risks of an investment and, in particular, the risk of total loss. Thus, investors should have been informed about the risks involved in a conversion of the bonds. If risks were concealed or downplayed, it could lead to claims for damages by investors against the company officials or also against the investment advisors and brokers.
For investors of the 7×7 Energiewerte Deutschland II GmbH & Co. KG, the situation has become even more opaque. After the conversion into the EnergieWerte Bau GmbH & Co. KG, it was recently announced that Enemowa eG is to take over the company. Research by MTR Legal indicates that the same individuals who operate behind 7×7 Invest are also behind this cooperative.
MTR Legal Rechtsanwälte has been advising investors for many years on capital market law.
