SCHEDULE 13D/A: Quaker Chemical Shareholder Amends Major Prepaid Variable Share Forward Transaction with Citibank
Schedule 13D Amendment
Gulf Hungary Holding Korlatolt Felelossegu Tarsasag and its subsidiary QH Hungary Holdings Limited have filed an amendment to their Schedule 13D, detailing the restatement of a significant prepaid variable share forward transaction with Citibank, N.A. to facilitate financing.
Summary
- Gulf Hungary Holding Korlatolt Felelossegu Tarsasag and its wholly-owned subsidiary QH Hungary Holdings Limited are the reporting persons.
- The filing is Amendment No. 38 to the original Schedule 13D, primarily to report the amendment and restatement of an existing prepaid variable share forward transaction with Citibank, N.A. (the '05/22/2025 Citi VPF Amendment').
- The reporting persons collectively beneficially own 3,715,129 shares of Quaker Chemical Corporation Common Stock, representing approximately 21.0% of the outstanding shares as of April 28, 2025.
- QH Hungary paid $4,828,795 to Citibank in exchange for amending and restating the First Citi Supplemental Confirmation.
- The transaction involves a maximum aggregate of 350,000 shares, divided into 50 components of 7,000 shares each, with scheduled valuation dates from June 1, 2027, to August 11, 2027.
- QH Hungary retains the option to settle its obligations by delivering shares or the cash equivalent, based on a formula tied to the share's Settlement Price relative to a Forward Floor Price of $104.9200 and a Forward Cap Price of $115.4120.
- A significant portion of the beneficially owned shares are pledged as collateral: 2,123,167 shares for a Margin Loan, 1,168,730 shares for Citibank Prepaid Variable Share Forward Transactions, and 418,215 shares for Royal Bank of Canada Prepaid Variable Share Forward Transactions.
Sentiment
Score: 6
Explanation: The sentiment is neutral to slightly positive. While there's a cost associated with the amendment, the primary purpose is to facilitate financing and maintain an opportunity for future growth, which are generally positive for a shareholder managing a large stake. It's a routine update on a complex financial arrangement rather than a performance report.
Positives
- The transaction was designed for QH Hungary to raise financing, indicating successful access to capital.
- QH Hungary maintains an opportunity to share in the Issuer's future growth through the structure of the prepaid variable share forward transaction.
Negatives
- QH Hungary paid a 'Third Amendment Payment Amount' of $4,828,795 to Citibank for the amendment and restatement of the First Citi Supplemental Confirmation, representing a direct cost.
Risks
- A substantial portion of the beneficially owned shares (3,710,112 shares) are pledged as collateral for various financial obligations, including a Margin Loan and Prepaid Variable Share Forward Transactions with Citibank and Royal Bank of Canada. Failure to meet these obligations could result in the loss of these pledged shares.
- The value of the shares to be delivered or the cash equivalent at settlement of the prepaid variable share forward transactions is dependent on the future market price of Quaker Chemical Corporation's Common Stock, introducing market price risk.
Future Outlook
The filing details future settlement obligations for the prepaid variable share forward transaction, with scheduled valuation dates extending from June 1, 2027, to August 11, 2027, and a Final Disruption Date of August 23, 2027. QH Hungary maintains the option to settle these obligations by delivering shares or the cash equivalent, allowing it to potentially benefit from future share price appreciation.
Industry Context
This filing reflects a common financial strategy used by large shareholders or private wealth entities to monetize a portion of their equity holdings while retaining exposure to potential future upside. Prepaid variable share forward transactions are a sophisticated form of equity derivative used for financing, often by large, long-term shareholders seeking liquidity without divesting their entire stake. The frequent amendments to these agreements suggest ongoing management of the financing structure in response to market conditions or internal capital needs.
Stakeholder Impact
- Shareholders: The filing details a significant beneficial ownership stake (21.0%) and how a large portion of these shares are used in financing arrangements, which could impact perceptions of shareholder stability and potential future share movements if pledged shares are called.
- Creditors (Citibank, Royal Bank of Canada): These entities are secured parties to various pledge and security agreements, indicating their exposure to QH Hungary's obligations and their security interest in a substantial number of Quaker Chemical shares.
Next Steps
- QH Hungary will be obligated to deliver shares or the cash equivalent to Citibank on settlement dates determined based on specified scheduled valuation dates between June 1, 2027, and August 11, 2027, for the First Citi Supplemental Confirmation.
Key Dates
| Date | Description |
|---|---|
| May 19, 2020 | Original Trade Date for Master Terms and Conditions for Prepaid Variable Share Forward Transactions with Citibank, N.A. and associated Pledge and Security Agreement. |
| May 26, 2020 | Original Trade Date for Master Terms and Conditions for Prepaid Variable Share Forward Transactions with Royal Bank of Canada and associated Pledge and Security Agreement; Date of Supplemental Confirmation No. 2 with Citibank. |
| August 27, 2020 | Date of Supplemental Confirmation No. 3 with Citibank; Original date of Supplemental Confirmation No. 6 with JPMorgan Chase Bank, National Association (later novated to Citibank). |
| March 9, 2021 | Date of Supplemental Confirmation No. 4 and No. 5 with Citibank; Original date of Supplemental Confirmation No. 7 with JPMorgan Chase Bank, National Association (later novated to Citibank); Date of Supplemental Confirmation No. 2, No. 3, and No. 4 with Royal Bank of Canada. |
| November 24, 2021 | Amendment and Restatement Date for First Citi Supplemental Confirmation; First Amendment Payment Date; First, Second, and Fourth RBC Supplemental Confirmations amended and restated. |
| August 10, 2022 | Second, Third, Fifth, Sixth, and Seventh Citi Supplemental Confirmations amended and restated; Sixth and Seventh Citi Supplemental Confirmations novated to Citibank; First and Third RBC Supplemental Confirmations amended and restated. |
| March 6, 2023 | Second and Fourth Citi Supplemental Confirmations amended and restated; First, Second, and Fourth RBC Supplemental Confirmations amended and restated. |
| November 22, 2023 | Second Amendment and Restatement Date for First Citi Supplemental Confirmation; Second Amendment Payment Date. |
| May 22, 2024 | Second, Third, Fifth, Sixth, Seventh, and Eighth Citi Supplemental Confirmations amended or entered; First, Third, and Fifth RBC Supplemental Confirmations amended or entered. |
| November 22, 2024 | Second and Ninth Citi Supplemental Confirmations amended or entered; First and Sixth RBC Supplemental Confirmations amended or entered. |
| April 28, 2025 | Date as of which 17,680,655 shares of Common Stock were outstanding, as reported in the Issuer's Form 10-Q. |
| May 1, 2025 | Issuer's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025, filed with the SEC. |
| May 22, 2025 | Date of Event Which Requires Filing of This Statement; Third Amendment and Restatement Date for First Citi Supplemental Confirmation; Third Amendment Payment Amount paid by QH Hungary to Citibank. |
| May 27, 2025 | Signature date of the Schedule 13D Amendment No. 38 filing. |
| June 1, 2027 | Earliest Scheduled Valuation Date for a component of the First Citi Supplemental Confirmation. |
| August 11, 2027 | Latest Scheduled Valuation Date for a component of the First Citi Supplemental Confirmation. |
| August 23, 2027 | Final Disruption Date for the First Citi Supplemental Confirmation. |
Keywords
Quaker Chemical Corporation, Schedule 13D, Beneficial Ownership, Prepaid Variable Share Forward, Citibank, Royal Bank of Canada, Margin Loan, Share Pledging, Corporate Finance, SEC Filing, Equity Financing, Shareholder Agreement
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