Green investments have been in vogue for many years. More and more people want to do good when investing and earn money. This is not always a happy ending for investors. Many a solar company, biogas factory or wind power plant have gone bankrupt in recent years.
Now a Munich company has also been hit: In January, Green City AG filed for insolvency due to impending insolvency and over-indebtedness. The company offers development, construction, financing and operation of plants for renewable energies. GCE Kraftwerkspark I GmbH, a subsidiary of Green City AG, also filed for insolvency on January 21.
In the meantime, the district court in Munich has appointed lawyer Axel Bierbach from the law firm Müller-Heydenreich Bierbach & Colleagues as provisional insolvency administrator. According to a lawyer, investors have to worry about around 250 million euros.
A team led by Bierbach is now examining the economic situation of Green City AG and all companies belonging to the group – there are at least 55. The operative business as well as the planning and implementation of projects in the areas of photovoltaics, wind energy and hydroelectric power plants should continue for the time being. The company is currently building four plants in Germany with a total output of almost 40 megawatts. The approximately 120 employees will initially continue to be employed, their salaries are secured by the insolvency money from the Federal Employment Agency until the end of March.
“Investors sometimes have to be prepared for very high losses”
“We will now examine all the restructuring options for Green City AG,” said renovation expert Bierbach. “Our goal is to find a continuation solution for the company and to enable the best possible satisfaction of creditors.” This includes thousands of retail investors, suppliers and institutional investors.
“The next few weeks will show how the company is doing,” says attorney Michael Leipold, who represents around 30 investors who have invested a total of almost 750,000 euros. The insolvency administrator now gets an overview of the financial condition of the company and examines all of the business documents. The creditors register their outstanding claims, which can be investors, employees of Green City AG, the Federal Employment Agency, suppliers, banks, credit insurers and so on.
Finally, a creditors’ meeting is convened, which decides how to proceed with the company. “All of this has to happen very quickly, since the employment agency only pays insolvency money to the employees for three months,” says Daniel Bauer, chairman of the board of directors of the Protection Association of Capital Investors (SdK). “So by the end of March it’s clear what the future looks like.”
A lawyer speaks of a “complex and non-transparent corporate network”
Lawyers are also examining claims for damages against the company, its managers and sales partners. Attorney Maximilian Degenhart from DMR Legal, who represents a double-digit number of investors, including institutional investors, identifies several points of attack here.
First there is the “extremely complex and non-transparent corporate network” with many subsidiaries. “Here, the management probably didn’t have as good a grip on their own company as they should have,” says Degenhart. The annual financial statements for 2019 were only recently published. How the years 2020 and 2021 went is unclear.
It is also irritating that the auditor noted in the consolidated financial statements for the 2017 financial year: “The existence of bank balances reported in the consolidated balance sheet in the amount of EUR 1,282 thousand has not been sufficiently proven.” It cannot be ruled out that the consolidated financial statements and the group management report are incorrect.
“In some cases, investors have to be prepared for very high losses,” warns Degenhart. Many could be doomed for having bought stocks or subordinated bonds whose claims will only be settled in bankruptcy proceedings after all claims of all non-subordinated creditors have been satisfied, for example the lending banks. According to SdK CEO Daniel Bauer, this applies to bonds issued by Green City Energy Kraftwerkspark II GmbH & Co. KG, Green City Energy Kraftwerkspark III GmbH & Co. KG, as well as various bonds and the shares of Green City AG.