In recent months, Expert Investor has been following the travails of green investment firm UDI, based in Nuremberg, Germany.
We ran our first story at the beginning of July, and openly posited that the company was in financial straits, and that some of its internal workings were, to put it mildly, murky.
It seemed apparent then, and definite now, that there are a lot of questions around UDI, but not many answers.
Founded in 1998, the company is reported to have taken in €0.5bn over its lifetime. It was run between 1998 and 2018 by Georg Hetz. Hetz sold the company to TE Management at that point, but UDI was not there for long—it was sold again in October 2020 to a company called Dalasy Beteiligungs- und Kapitalmanagement. Soon afterwards, TE Management filed for insolvency.
“UDI,” we wrote in our original story, “appears to have operated as a multitude of corporate entities, under the GmbH legal form in Germany, with each fund a separate GmbH. A document forwarded to Expert Investor by one of the legal firms said to be representing UDI companies lists at least 168 GmbHs linked to UDI. Many of these appear to have been individually managing funds totalling millions of euros.”
It also appears that many of the companies under the UDI umbrella were making subordinated loans to each other, which one lawyer told us was an uncommon occurrence.
Not much seemed amiss until, between 18 February and 27 May this year, national regulator BaFin ordered that seven funds owned by UDI had to be wound up. The reason given was that customers had been promised guaranteed returns, a vow that the regulator said made UDI a bank, something it was not licensed or authorised to do. UDI was ordered to pay all these ‘deposits’ back to investors.
It was at this point that the dominos began to fall. The management at UDI, in multiple releases on its website in recent months, said that it was restructuring.
Those moves now seem moot.
Growing concern
As Handelsblatt reported last week, the Leipzig District Court opened insolvency proceedings against another five of UDI’s companies.
According to Handelsblatt: “This makes it official: The UDI Group, which financed biomass and solar plants with the money of private investors, will not be restructured in self-administration. Rainer Langnickel’s management had been publicly pursuing this plan since May.”
Expert Investor reached out to Dr Susanne Schmidt-Morsbach. Based in Berlin, she is representing some UDI investors. A few weeks ago, she revealed that a class action lawsuit was in the works.
Schmidt-Morsbach revealed that the court in Leipzig had opened insolvency proceedings against more than five of UDI’s subsidiary companies, listing eight in an email.
After outlining the legal route that BaFin had gone down, along with a ruling from the Hessian Administrative Court that the regulator’s actions were legal, Schmidt-Morsbach further revealed new information about UDI’s dealings.
She wrote: “Dr Wallner, who was previously the provisional administrator, was appointed by the court as the insolvency administrator. In a press release, UDI states that it has already been possible to implement numerous reorganisation goals within the framework of the preliminary self-administration. What these look like and what has been achieved, we will find out in the report date on the above-mentioned insolvency proceedings. So far, it is only known that Mr Langnickel’s company, U 20 Prevent GmbH, had taken over large parts of the receivables from investors for a fraction of the nominal value shortly before filing for insolvency. To what extent here actually reorganisations in the sense of the investors were accomplished, is not known.”
U 20 Prevent enters stage left, as another new player in this saga.
Schmidt-Morsbach said that investors could now register their claims with the insolvency administrator by 5 or 12 October, but that this was not a deadline. She added: “We assume that the investors of UDI Festzins II to VIII will be requested by the insolvency administrator to file their claims. Investors who invested in UDI Festzins IX may not receive a request from BaFin due to the lack of a liquidation order. We strongly recommend these investors to file their claims in the insolvency proceedings even without a request by the insolvency administrator.”
Schmidt-Morsbach said that the insolvent companies of UDI would not survive. However, the project companies that received loans from investors, could prevail. “However,” she added, “two have already applied for insolvency.”
Shiny brochure
Much of this is numbers and names, but there is a human cost to this. A few months ago, the German news programme Tagesschau ran a piece on UDI. In the story accompanying the piece on its website, the writer Daniel Hoh got in contact with one UDI investor.
Hoh wrote: “For Herbert Petzoldt, it is a bitter setback. The pensioner from Oberursel near Frankfurt am Main had previously lost money in the scandal surrounding the insolvent wind farm operator Prokon. Now he has to fear again. He had invested years ago in financial products of the provider UDI. The brochures were professionally presented. ‘That looked very serious at the beginning’, he says. But now he is still waiting for the repayment of around €65,000.”
The piece quoted another newspaper: “Research by Hessischer Rundfunk shows that UDI has repeatedly used investor funds to support loss-making projects. Investors were not initially told what exactly their money would be used for. Example: the biogas plant in Barleben in Saxony-Anhalt. According to internal documents, more than €1.5m in investor funds flowed into the operation by mid-2018. And this despite the fact that the plant was in the deep red, in 2017 alone, the net loss for the year amounted to just under €1.9m. The loss-making biogas plant in Kreiensen in Lower Saxony was also supported in this way.”
According to the piece, the public prosecutor in Nuremberg—UDI’s hometown—is investigating several of the people involved with UDI.
Petzoldt, the investor who was looking to recoup savings of €65,000 in UDI, is far from alone. Said Hoh of Tagesschau: “According to the UDI, around 6,000 investors are currently waiting for their money, it is about a total sum of €128m.”
