Conversion of bonds and investors’ risks
Investors who have invested in bonds of the 7×7 Group may be concerned about their invested money due to the developments. Problems with repayments, extensions of terms, “conversion” of the bond into subordinated loans, and the planned takeover by a newly established cooperative may cause unrest. Investors need to question whether they have actually invested their money safely or are at risk of significant financial losses.
The developments in the bonds of the 7×7 Group are concerning. Both the bond 2013/2023 (ISIN: DE000A1TNGS8) of 7×7 Invest AG and the bond 7×7 Real Assets Germany I GmbH & Co. KG (ISIN: DE000A169K35) already faced repayment issues in 2023, and investors ultimately agreed to a term extension. The debenture of 7×7 Energy Values Germany II GmbH & Co. KG (ISIN: DE000A2GSF90) is traded on the Frankfurt Stock Exchange and has lost significant value. Recently, the company changed its name to Energy Values Bau GmbH & Co. KG and relocated its headquarters from Bonn to Dillenburg.
7×7 submits purchase and takeover offers
At the beginning of the year, the 7×7 Group withdrew all bonds and offered investors purchase and takeover proposals with the option of continuation as loans. In a letter to bond investors, it is stated that a long-planned refinancing of the real asset projects can now take place, and the cooperative Sieben Werte eG is taking the helm.
Investors who have so far invested in the construction of real estate or the construction of solar parks should receive a purchase and takeover offer. This included the option of continuation as a loan under the same conditions or the conversion into an equity 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 more specifically the conversion into a subordinated loan. This at least emerges from further correspondence of 7×7 Energy Values Germany II GmbH & Co. KG. Since spring 2024, only subordinated loans have been mentioned. This makes it a highly risky investment for 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 subordinated to the claims of all other creditors. Especially in the event of insolvency, investors are at risk of going empty-handed and suffering a total loss of their invested money. Due to the agreed subordination, investors cannot assert their claims against the issuer if it would or could result in the issuer’s insolvency.
By accepting the purchase offer, investors of the 7×7 bonds have agreed to a buyback. However, since the purchase price was immediately booked as a loan, they have not received any money. At least with a subordinated loan, the risk remains that investors will continue to not receive payments. Therefore, it is essential to review whether a subordination was effectively agreed upon. This is often not the case if the clauses regarding subordination are opaque and unclear for the investor.
Claims for damages by investors
Investors in the bonds may also have claims for damages. They have a right to be informed about all essential aspects that could be relevant to their investment decision. This naturally includes information about the risks of an investment and especially about the risk of total loss. Investors should have also been informed about the risks in converting the bonds. If risks were concealed or downplayed, this can lead to claims for damages by investors against company executives, or also against investment advisors and intermediaries.
For investors of 7×7 Energy Values Germany II GmbH & Co. KG, developments have become even more opaque. After the conversion into Energy Values Bau GmbH & Co. KG, it was recently announced that Enemowa eG is to take over the company. According to research by MTR Legal, the same individuals behind this cooperative as at 7×7 Invest.
MTR Legal Rechtsanwälte has been advising investors for many years in capital market law.
