Posted inAnalysis

Dark clouds on the horizon for UDI?

Nuremberg-based investment company UDI has recently run afoul of BaFin, Germany’s federal financial regulator.

According to BaFin, UDI was given cease-and-desist orders to immediately stop and wind up seven funds that the watchdog had decided were unauthorised deposit businesses. One of those decisions was reached on 18 February, followed by two more on 10 May, and a further four on 27 May.

The funds in question are:

  • UDI Energie Festzins VI GmbH & Co. KG,
  • UDI Energie FESTZINS VII GmbH & Co. KG
  • UDI Energie Festzins III GmbH & Co. KG
  • UDI Energie Mix Festzins GmbH & Co. KG
  • UDI Energie Festzins IV GmbH & Co. KG,
  • UDI Energie Festzins V GmbH & Co. KG
  • UDI Energie FESTZINS VIII GmbH & Co. KG

According to multiple releases from BaFin, the funds were ordered to pay back investments immediately. The reason given in each case was that, in promising guaranteed returns, UDI’s funds were operating as a deposit business and needed a banking license from BaFin.

Recent case law

In a statement to Expert Investor, BaFin’s head of press division, Oliver Struck, said that the ruling had come from following up on a ‘hint and indications’ about the conducting of unauthorised business.

He added: “The investment offers issued by companies of the UDI Group, which BaFin has ordered to be wound up, are loans with a subordination agreement. Against the background of the recent case law of the Federal Court of Justice, the subordination agreement is not effective.”

He added: “The loans were therefore to be qualified by BaFin as deposit business, which requires a permit as a banking business.”

Struck went on to say that, under German law, the order to return deposits was immediately enforceable even if not yet final.

Revolving ownership

UDI has been in business for over 20 years, specialising in investment projects centred around renewable energy. According to its own website, the company was founded in October 1998 by Georg Hetz. In that time, it has reportedly taken in €0.5bn from investors.

Hetz ran UDI for two decades but recent years have seen its ownership switch hands repeatedly. In December 2018, Hetz sold UDI to Stefan Keller, managing director of Munich-based TE Management.

TE Management, in turn, sold UDI in October 2020, along with the company SKU Holding, to a company called Dalasy Beteiligungs- und Kapitalmanagement.

That company is itself owned by another called Galoria. The managing director of Dalasy is Rainer Langnickel.

After offloading UDI in October, TE Management filed for insolvency earlier this month.

UDI 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.

Lots of questions

It is at this point that the story becomes murky. Writing for Anwalt earlier this month, Dr Susanne Schmidt-Morsbach, a lawyer at Berlin-based Schirp & Partner, said: “The insolvency of TE Management GmbH has an impact on several financial products of TE and UDI. There is an increased risk that investors will lose some or all of their capital invested through subordinated loans.”

Schmidt-Morsbach added: “For five UDI issuer companies, Rainer Langnickel then also published ad hoc announcements in accordance with Section 11a (1) of the German Investment Act. According to their own information, these companies have provided subordinated loans to TE Management GmbH as an intermediate company.

“This affects the offers UDI Energie Festzins 13, UDI Energie Festzins 14, UDI Immo Sprint Festzins 1, UDI Immo Sprint Festzins 2, and TE energy sprint Festzins 1. The repayment is now doubtful.”

It is understood that much of the money that UDI took from investors was paid out as subordinated loans to other parts of UDI. It is not clear where that money went.

Schmidt-Morsbach said in an email to Expert Investor that this type of loan between UDI and TE Management is ‘not normal’.

She added: “The prospectuses for investors said that the money is for companies that invest in solar or power plants.”

Asked directly about whether, given the amount invested in UDI over 20 years, this was going to be a bigger story, Schmidt-Morsbach said: “That’s what I think, too. The money wasn’t invested in the right way. We have no actual numbers from the project companies in which the UDI had to invest. But everything I hear about them is not good!”

Only the beginning?

Peter Mattil is a lawyer in Munich, working for the firm Mattil & Kollegen. He says that his firm is representing many of the investors in UDI’s funds. He has also been appointed as a member of the creditors’ committee.

Mattil says that UDI are already in default when it comes to paying interest. He adds: “There are problems in the subcompanies that are operating business. We don’t know what happened in the complete group but there are over 100 companies linked together and some have been collecting money while others have been doing business.”

Mattil is careful to say that making such subordinated loans is not illegal in Germany. He is also unclear about how many companies UDI has—or had—under its umbrella.

He adds: “The companies that are going into insolvency raised €100m. These are a small part of the same group. This is only the beginning of a collapse of an investment group.”

UDI were contacted multiple times for this story, but did not comment.

Expert Investor spoke to Marten Neelsen, the press contact for TE Management. He refused to answer as to whether loans from UDI to TE Management had been repaid or if there was any plan for the company to do so in the future.

Further questions were referred to an October 2020 press release regarding the sale of UDI from TE Management to Dalasy.

Pete Carvill

Pete Carvill is a reporter, writer, and editor based in Berlin who has been writing for the B2B and mainstream media since 2007. He is a contributing writer for Expert Investor Europe and, in addition,...