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Corona & Mittelstand Bonds: Behren’s difficult path

D.he manufacturer of pneumatic nailers, Joh. Friedrich Behrens, wants to issue a fourth corporate bond with a volume of up to 15 million euros. What may at first sound unspectacular, however, in view of the pessimistic expectations of German medium-sized companies, highlights their situation and especially their financing situation.

At the beginning of September, Behrens announced that the company was threatened with bankruptcy as a result of the business development in the first half of the year if it failed to refinance a bond with a volume of around 16 million euros due in November. Since, due to the circumstances, the simple issue of a new bond, as in the previous year, did not seem promising, Behrens said at the beginning of July as one of the first companies to apply for a guarantee from the Economic Stabilization Fund (WSF) for a corporate bond with a volume of up to 20 million euros. What the company was not aware of at the time was that bonds with a volume of less than 100 million euros were issued. The corresponding rejection was “very surprising and disappointing” for Behrens AG, as positive signals had previously been sent in this direction. Independent attempts by the association of capital market-oriented SMEs to persuade the Federal Ministry of Economics (BMWi) to extend the guarantees to small bonds were also rejected by the latter.

Instead, the WSF currently only provides for silent participations in medium-sized companies. Observers had expressed doubts that a possible hodgepodge of silent participations would be more productive. After the guarantee had been rejected, Behrens had applied for such a silent participation “in order not to wait any longer for an option that is probably not available”. The company still has to wait: As Behrens announced on Thursday, the final approval is still pending. But they are confident that they will receive a silent participation of four million euros in the short term. This also depends on whether the company receives a basically committed loan and a silent participation of two million euros from a consortium of the Schleswig-Holstein funding institutes. Furthermore, one wants to use a bridge financing of a debt fund for part of the bond refinancing.

It is currently not known whether and how the squabble over support measures for SMEs in general and guarantees for small bond volumes will develop. Those involved are optimistic, however, that guarantees from the WSF will still come.

The new bond from Behrens will now have an interest coupon of 7.25 percent. That is a full percentage point more than the bond issued last year, which is currently yielding 11.4 percent. This can be seen as an expression of a difficult financing situation. Meanwhile, the return had risen to more than 17 percent.

The bond due in November bears 7.75 percent interest and can be exchanged for the new bond by holders, who receive a special payment of 25 euros and the accrued interest. New drawings are also possible.

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