Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the conference call of ams OSRAM. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Jürgen Rebel, Head of Investor Relations. Please go ahead, sir.
Good morning, everyone. I would like to welcome all of you to our call for investors and analysts on our new financing plan. The plan is laying a solid financial foundation for our strategy. Thank you for joining us on such short notice. Aldo Kamper, CEO, and Rainer Irle, CFO, are with me today. They will walk you through the details of the plan. After the introductory remarks, we are happy to take your questions. Aldo and Rainer will refer to the presentation on our financing plan that you find on our website. Aldo, the stage is yours.
Thank you, Jürgen, and good morning, ladies and gentlemen. When I started almost six months ago, I realized quickly that we have to address various elements to rebuild ams OSRAM to fully, fully benefit from its underlying strength. Let me quickly recall the building blocks of the new ams OSRAM that we have already addressed in the first three months of my tenure. First, we sharpened our strategy towards structural growth and profitable core of automotive, industrial, and medical markets with intelligent sensors and emitter components. Second, we rebalanced the approach we are taking for benefiting from growth opportunities in the portable consumer device arena by focusing only on those where we can truly differentiate sustainably. We prefer single-source situations wherever possible. This also comes with divestment of businesses in this area where the differentiation cannot be achieved.
Third, we also made our organization more efficient and accountable by giving true end-to-end responsibility to our business units. At the same time, we're reducing the number of business units in the semi segment from three to two. This approach overall helps us to have a stringent approach to monetizing innovation going forward. Furthermore, we decided to work on right-sizing our organization to new realities and have initiated an improvement plan to achieve this. With these strategic building blocks defined, it is now time to turn to the financial foundation of our company, its balance sheet, and its financing plan. I'm now on page three of the slide deck. With the Q2 earnings release, we said we have a comprehensive plan on the table. Today, we present this comprehensive, holistic plan, which is meant to address all aspects of financing needs for the years to come.
We want to be well ahead of the incoming maturities to exclude dependency on market uncertainties and always be in control of our own destiny. The financial basis needs to be stable and sustainable and tailored to the type of business we are in. In order to reflect this, we are targeting an investment-grade profile in our capital structure. Rainer and I have received very positive feedback from the investor community on our Reestablish the Base program, with a revised strategy at its center. This down-to-earth focus on the most promising segments, in combination with logical divestments, cost optimizations, and clear corporate structures, is clearly seen as the right direction to take. Since its announcement after Q2, we've already made good progress. We could implement the new responsibility in the organization and are well on track in preparing the divestiture of the passive optical component business, for example.
When it comes to the upcoming debt maturities until 2025, we have to cover senior unsecured notes, convertible bonds, short-term bank facilities, and promissory notes. We also have to cover some cash flow needs due to the planned and known investments for our growth strategy, such as microLED, as the biggest block. We have about 70% of OSRAM Licht AG minority shares outstanding as of Q2 2023. We always want to be able to cover the theoretical case that all put options are exercised at once. For this, we have an RCF in place. When it comes to the financial strength of the balance sheet, we hover at an equity ratio of around 18%, which we consider significantly too low for the type of business we are in.
In summary, we need a EUR 2.25 billion financing plan to holistically cover all expected needs until 2025, 2026. After that, we anticipate regular mid-sized refinancings according to a new maturity profile. Now, let us move to slide four. Our financing plan of EUR 2.25 billion is designed to increase equity, reduce debt, and target a balanced maturity profile for the future outstanding debt. Rainer has been instrumental in putting this plan together. For this, let me hand over to him to explain the details of it.
Yeah, Aldo, thank you. Over the next six months, we want to execute an equity and debt combination deal and some asset-level transactions to finance around EUR 1.9 billion. We plan a discounted subscription rights offer of EUR 800 million. We will seek approval for the capital raise in an extraordinary shareholder meeting that will be held on October twentieth at our headquarters in Austria. We also plan the placement of a new senior unsecured note with a total volume, the order of some EUR 800 million. I will comment in more detail about the advantages of such a combo deal structure in a moment. Furthermore, we are progressing well with certain asset-level financing transactions, such as a sale and leaseback, that would provide proceeds of at least EUR 300 million.
We will finance the remaining amount of about EUR 350 million throughout 2024, and we want then to select the optimum of debt instruments when it comes to that, subject to market conditions. In total, this will yield a pro forma equity ratio of approximately 30%. We'd also like to mention that our business plan is supported by various governmental funding schemes, which help greatly to accelerate the development of certain cutting-edge technologies. You may have seen our announcements on the Important Project of Common European Interest funding and the support of the Malaysian Investment Development Authority recently. We are applying for further grants and other schemes across the globe, but altogether, you can think of a high triple-digit million EUR amount that we are supposed to receive over a 10-year horizon, subject to the milestones and conditions of each funding scheme.
So far, we have been cautious with taking the proceeds of the divestment of the non-core semiconductor portfolio into the financial plan. The first conversations, though, with potential buyers for part of this portfolio, such as passive optical components, felt promising. With increasing confidence in these negotiations going forward, we would consider potential proceeds from those divestments in the financial plan, again, to optimize the overall financing costs and to reduce leverage. In summary, our financing plan increases equity, reduces gross and net debt, and will enable a balanced maturity profile of the outstanding debt for simpler refinancing in the future. Thus, we have put together a comprehensive plan to have a stable, sustainable and future-proof financial base. Let us look at some details now. On slide five, you find an overview of the outstanding debt matures of EUR 2.2 billion until 2025.
As of June 2023, we had a cash position of EUR 841 million. We have EUR 120 million of promissory notes outstanding that need to be repaid this year and in 2024. We also have EUR 404 million of bank facilities outstanding. Of those, EUR 111 million are due this year and EUR 264 million due next year. In 2025, now we have the three major maturities: the euro-denominated senior unsecured note of EUR 850 million, the US dollar-denominated senior unsecured note of $440 million, and finally, a EUR 447 million convertible bond, which is deep out of the money, which means it is plain debt. On slide six, you find a graphic representation of the staged financing plan.
You clearly see the stages to be executed over the next quarters. As repeatedly mentioned to the market the last couple of weeks, we want to execute the decisive steps as quickly as possible to make any question mark on our balance sheet disappear. Let me comment on the centerpiece, the rights issue. We want to create a solid financial base once and for all. We have also been encouraged by investors when addressing the financing topic, to rather go big than leaving any questions on the table. For this, we will invite to an extraordinary general shareholder meeting on October twentieth, and suggest the rights issue of EUR 800 million. The rights issue has been volume underwritten by HSBC, Morgan Stanley, and UBS. We plan to combine the rights issue with issuance of around EUR 800 million of new senior unsecured notes.
It will consist of a mix of U.S. dollar and euro notes with staged maturities. Clearly, this mix will be designed to achieve a smooth maturity profile for the future. The beauty of this so-called combination deal is that it brings advantages for both equity and debt investors. Typically, equity is waiting for the debt side, and the debt side is waiting for the equity side, and we fix both now at the same time. With the underwriting by HSBC, Morgan Stanley, and UBS, bond investors can trust that the rights issue will be executed. This is expected to also lead to better financing conditions. The new bonds will go in escrow at issuance until the rights issue has been completed. This tells the equity investors that the financing will work. As such, both equity and debt investors can trust that the full financing will be executed successfully.
The third element in the first six months includes certain planned asset level transactions, such as asset sale and leasebacks. We cannot or we do not want to share more details right now, as the transactions are in progress, but rest assured that we will communicate details once such deals are signed or executed. We are planning with an amount of at least EUR 300 million from those transactions, and we are very confident that those will close. Why did we add this element to the mix? Well, such transactions have very good borrowing costs and help us optimizing the overall borrowing costs. In 2024, then we will finance the remaining amount, presumably around EUR 350 million. We are thinking of an additional senior note, maybe bilateral credit lines or other debt instruments like converts.
We will decide on individual instruments and the potential mix subject to the best available market conditions when it comes to that. In total, we want to bring in EUR 2.25 billion. Now let us have a look at slide seven. Our ultimate goal is to achieve an Investment Grade profile and getting all to the associated appreciation by the credit rating agencies. Today, we stand at BB- from S&P and B2 from Moody's. This is not what we want. The key prerequisite for receiving a positive outlook and ultimately improvements is the rating, is to have a leverage below two and a positive free cash flow. Leverage means here the net debt to Adjusted EBITDA.
In Q2 of this year, we show the leverage of 2.9 x, given the still higher than target ratio of 10% capital expenditures for investments in future technologies in 2024, especially micro LED, this ratio would peak above three in the first half 2024. Consequently, the proceeds from the rights issue will be used almost exclusively to repay debt to increase the equity ratio. On a pro forma basis, taking Q2 figures as a starting point, you see on the slide, we would come out at a leverage ratio of 1.8 times. This would present a solid financial base to execute the recently announced strategy and the starting point for improving our credit rating. At the same time, we also work hard to improve the EBITDA of the company, especially in the semiconductor segment.
As you might recall, our Reestablish the Base program is planned to deliver EUR 150 million EBIT improvement by end of 2025, and we are targeting at least 50% adjusted EBIT by 2026. On slide eight, you find an overview of the rights issue. Let me comment on some important points. When issued, the shares will trade at the theoretical ex-rights price, defined as the weighted average price of old and new shares. The shares are offered to existing shareholders by way of subscription rights on a pro rata basis. How does this work? Every shareholder gets allocated subscription rights for buying a certain amount of new shares at the exercise price. The rights issue with subscription rights gives existing shareholders three options. Basically, the one is to exercise all rights, which will result in no economic or voting dilution.
Number two, obviously, is to sell all rights and somebody else will exercise it. And option three is kind of a combination, which is cash neutral, where you sell some and exercise others. And on the right-hand side, you see the principal mechanics with the discount to TERP calculation. Now, on page nine, without commenting on every detail, you will find further information on the EGM, such as resolutions, available documents, recording dates, proxy representations, and shares. Now, looking at page 10 and our liquidity position. End of Q2, we had a healthy cash balance of EUR 841 million, maybe a bit too much. On top, we hold a total of EUR 926 million of undrawn credit facilities, and within that amount, there is an EUR 800 million revolving credit facility.
We have reserved this revolver for always being able to cover potential large bulk exercises or put options on the outstanding OSRAM Licht AG minorities. I will explain details on the minorities in a minute. Regarding the revolver, we are in advanced discussions with our relationship banks to extend its maturity to September 2026. The total available liquidity stood at around EUR 1.8 billion at the end of Q2. As a guiding figure for our cash balance, we will target an operating cash balance of around EUR 500 million, which forms a planning basis for our comprehensive financial plan. We often get asked on the liabilities and status with respect to the outstanding shares held by the minority shareholders in the OSRAM Licht AG. Let me explain the details on slide 11.
Based on the Domination and Profit and Loss Transfer Agreement, remaining shareholders have a put option at 45.54 EUR per share. End of Q2 this year, around 17% of OSRAM shares were still outstanding. We estimate that within those 17%, about 3%-4% are held by retail investors, and around 13% by institutional investors. We see regular exercise of such put options during the quarter with a pretty erratic pattern. At the end of every quarter, we report the remaining outstanding percentage to you. The total liability for these put options is recognized fully as other liability in our balance sheet and stood at EUR 748 million in June 2023. Legally, the company's view on the valuation of the OSRAM Licht AG shares was confirmed by the first court ruling already in June 2023.
However, as expected, an appeal was filed and the final verdict is estimated around 2025 or even later. This is a pretty normal procedure in German public M&A situations. For completeness, German corporate law allows a squeeze out at 90% threshold for shares held. Although we are not aware of any details, typically certain institutional investors and such minorities speculate on the final verdict or potential squeeze-out procedure, hoping for even more money... It is in the unlikely event that all outstanding put options are exercised at once, and we keep our undrawn revolving credit facility of EUR 800 million in our back pocket to cover this eventuality. Now, before summarizing the key takeaways of our financial plan, let me say a few words about the indicated sale of the treasury shares held by the company, and we are on slide 12.
We hold those shares to cover obligations for our share-based long-term compensation schemes of key employees. Now, under Austrian corporate law, treasury shares are not eligible to subscription rights in the rights issue, which is weird. Consequently, the company's own holding would be automatically diluted. We hold around 30 million treasury shares, and the subscription rights could amount to a double-digit million EUR amount, maybe EUR 20 million, all subject to the conditions at the rights issue, and we do not want to give up this amount. After the rights issue, we will initiate a share buyback program to be again in a position to cover our long-term obligations for share-based compensation. Net, this is just a pure technical transaction to avoid automatic dilution. That is a summary, and with that, back to Aldo.
Thank you, Rainer. And now turning to the summary page. Today, we have presented to you a comprehensive financial plan to finance EUR 2.25 billion. The goal is reducing our debt level, thereby improving our equity ratio to approximately 30% pro forma for achieving investment grade profile by 2026. The financing will comprise, as Rainer outlined, a staged smart combination of rights issue, senior unsecured notes, and other financial instruments covering all expected needs until 2025, 2026. Over the next two quarters, we plan to finance around EUR 1.9 billion out of that. A rights issue of EUR 800 million, subject to approval at the EGM on October 20, 2023.
New issuance of senior unsecured notes of around EUR 800 million in a mix of euro, dollar, and different maturities, and other asset transactions, such as sale and leasebacks, in order to optimize the overall borrowing costs in a high interest environment. In 2024, additional debt instrument of around EUR 250 million will be issued. We will select the instruments that offer the best conditions when we get there. As a continued backstop for the outstanding Austrian minority put options, we expect that our undrawn revolver of EUR 800 million will be continued to September 2026. Last but not least, we are proud of the trust that governments across the globe put into our innovation and industrialization power, receiving a triple-digit million EUR amount over the next ten years.
This concludes our introductory remarks, and now Rainer and I are happy to take your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star, followed by one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone with a question may press star and one at this time. One moment, please, for the first question. The first question from Sébastien Sztabowicz from Kepler Cheuvreux. Please go ahead, sir.
Yeah, hello, everyone, and thanks for taking the question. I know it is maybe a little bit too early to say, but do you have any idea of the cost of financing, your cost of financing post the financing plan is closed? And second one, on the capital increase from a technical point of view, you are planning to have this EGM on 20 October. What kind of timing do you have in mind for the capital increase? Thank you.
Yeah, the timing is kind of, I mean, very much given under Austrian law. So there's, I mean, the EGM will be on the twentieth and, then comes a technical period, and then comes kind of the capital increase, and then the trading period for the subscription rights, which gives us a settlement roughly in the second week of December. So the other question on the cost of financing. So kind of, you know, we had end of Q2, we had, like, EUR 2.9 billion debt, probably with EUR 800 million cash, we will reduce that a little. So, and then comes the EUR 800 million capital increase, that will reduce the debt.
And then, kind of, you know, we do not know exactly the interest rate that we will be paying, but kind of, we are kind of hopeful that it will be single digit, high single digit, obviously, and that gives you a rough idea of the interest cost going forward.
Okay. Thank you.
The next question comes from Jürgen, Jürgen Wagner from Stifel. Please go ahead.
Yeah, good morning. Thank you for taking my question. When will you announce the subscription price? And, can you share with us the, the minimum price, your banks have committed on the underwriting? Thank you.
Hey, Jürgen, good morning. So minimum price is again in any of this volume underwriting, the prices, the 1 franc, in this case, yeah, around EUR 1. That is kind of... So the procedure works, that is up to 800 million new shares. Obviously, that is not the price we have in mind. So let's see how the price develops. Kind of, I mean, we saw a reaction this morning. Overall, we truly believe that—I mean, with the feedback from all the investors we had over the last months, that kind of this was the thing that was in the way.
So we expect that, you know, after the initial election, to be really a catalyst, and kind of to focus on the equity story instead of that maturity wall. So once we know the price then, in a couple of months, we will determine the discount. That is something that will happen pretty late in the process, just prior to the beginning of the trading of the subscription rights, and that will be around in late November.
Okay. On the bond, what are the interest rates indication? Can you share those with us?
Yeah, you know, I mean, I wish I can tell you the wish I have. But I mean, if you look at the outstanding bonds that we have and the yield to maturity that came down nicely after our Q2 announcement. It was single digit. We had on the euro, we had a, you know, yesterday, before the announcement, it was even slightly below 9%, and then the U.S. dollar was close to 10%. So I think that's an indication, but I mean, we will really only know once we go through the book-building procedure.
Okay, thank you.
The next question comes from Robert Sanders from Deutsche Bank. Please go ahead.
Yeah, good morning. I was just wondering about the timeline for the uplift in your financials from the exit of the businesses you've announced that you're getting rid of in consumer. Does that sort of take time to come through the financials next year? Or are you being quite aggressive in terms of sort of ramping down businesses that may not find a buyer?
Well, I think we, we've also mentioned this in the Q2 call. It is a process that we have just started. I mean, the strategic review we did basically during the second quarter, draw our conclusions then in July, and then started the sales process on the optical component piece that also Rainer mentioned. We are quite advanced now in the preparation. We're talking to investors, and that might move relatively quickly. The other business that we have in mind, we're still in a preparatory phase, and it will take throughout 2024 to see whether and how these deals exactly materialize.
Got it. Thank you.
Sure. Welcome.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Thomas Mannion from Sarria. Please go ahead.
Good morning. But if I, if I get the timing right on this, you're gonna be launching a high-yield issue in the next couple of days, is that? So prior to the rights issue, and just for confirmation, you were looking to put the high-yield bond issuance into escrow until the rights issue is raised. Have I got the timing right on that?
Yeah, yeah. So thanks for the question. You're probably a bit too early, so we will do it prior to the subscription rights. And it will go in escrow, but this is kind of nothing that we would do right now. That also comes somewhere in November then.
Okay, so the EGM is likely to be the first step?
Yeah, the EGM is the first step and kind of, and we will be talking to a lot of investors. We'll be on roadshow, explain it in more detail. So we're finding a lot of interest there. And then comes the EGM, and then we will do the marketing of the bonds, the book building, collect the money. Our banks will hold it in escrow till the rights issue is through. So kind of if in the second week of December, we get the money from the rights issue, and then one day later, the money will release from the escrow, from the higher fund.
Okay. Thank you.
The next question comes from Daniel Lion from Erste Group. Please go ahead.
Yeah. Hi, good morning. Thanks for letting me on. Can you share a little bit more detail on the previously announced investment of your client for the cooling fab? Do you expect this to happen this year under the Point S transaction, or is this rather a topic for the additional financing in 2024? We also refer to bilateral financing structures.
So, I mean, there's nothing has really changed there. We are still working very hard towards a 2025 launch and are making the steps to support that. In terms of capital requirements, of course, this will still mean that we will see elevated CapEx levels this year and also in 2024, and that is taken into consideration also in the financing plan.
Okay, thanks.
Gentlemen, so far there are no more questions from the phone.
Okay, well, if there are no further questions, then many thanks for dialing in on short notice. I hope that we were able to give you a good outline of this very comprehensive financing plan that the team has put together. In our minds, it's a smart way of combining instruments to get to a good result. The good result being, in our mind, a very stable financial base for our future growth. With it out of the way, it allows us to fully focus on the execution of our strategy and the improvement of our results and cash flow. That's what we are really dedicated to do, and where there's a lot of energy in the team to get it done.
So many thanks from my side to the financing team that has put this together. And now we'll go through the motions here to make sure it all happens as planned, and at the same time, continue to work on the operational side on the improvement that we have outlined. So thanks so much, and have a good day. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.