W.hen a company like the leasing specialist Grenke comes under fire, the shareholders suffer first. The short sale attack by British investor Fraser Perring, who accused the Baden-Baden-based company of balance sheet fraud, lack of liquidity and money laundering, cost more than half of the market value at times. Since Grenke has regularly issued bonds with a minimum investment volume of EUR 1,000 that were also suitable for private investors in recent years, we should like to remind you of the losses in value for creditors. Currently, Grenke bonds are traded on the market at discounts of 20 percent and more.
In mid-September, when the wave of attacks rolled towards the leasing company in the form of reports from Perring’s research house Viceroy, it was even more than that: the yield on the bond due in April 2024 soared to over 17 percent, after being 0.27 percent in March had been lying. The title has an interest coupon of 1.625 percent. Such an increase in yield can only be explained by fear of payment difficulties. The course has since stabilized again. But the current yield of around 8 percent continues to signal a concern on the bond market, which corresponds to the fluctuations in the price of Grenke shares.
The rating agency Standard & Poor’s (S&P) has also become nervous. She is currently reviewing the Grenke rating with regard to Perring’s allegations. This check is carried out with a negative sign, so it is aimed at a possible downgrade. Grenke is currently still rated “BBB +” by S&P. This puts the company two rating levels above the so-called junk range, which starts below “BBB–”. Grenke is an investment grade and thus one of the bond issuers whose creditworthiness is considered worth investing.
Company has liquidity
The company has now been able to refute Perring’s accusation with its proof of liquidity on its Bundesbank accounts. The due dates in the coming years also seem to be manageable. According to information from Grenke, debt securities of 145 million euros will mature by the end of the year. In 2021, debt securities with a volume of around 339 million euros must be redeemed. In 2022, bonds with a volume of around 529 million euros will have to be repaid to the creditors.
With a liquidity of more than one billion euros as of June 30th and financing that matches the maturity of the business, Grenke creditors can feel relatively secure. But the company is under pressure. The complex franchise structures and their connections to the company’s founder Wolfgang Grenke must be explained to the capital market and financial supervision. If that succeeds, not only the shareholders, but also the bondholders will be able to enjoy substantial price gains.