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Tough days for small bonds

I.n the past few weeks, the supply of high-yield bonds from medium-sized issuers has picked up. But apparently demand is not keeping up.

It becomes particularly difficult for the manufacturer of wood fastening technology, especially pneumatic nailers, J. F. Behrens. In months of detailed work, he achieved that the economic stabilization fund set up to combat the consequences of the corona crisis promised a silent participation in the company. Initially, the company applied for a bond guarantee, but this was rejected according to the award criteria at the time and only recently approved (F.A.Z. of). Companies in the state of Schleswig-Holstein also agreed to help.

But now private funding is shaky. On Monday evening, Behrens announced that “the negotiations with potential lenders have not yet been successful, as no agreement on essential contract content could be found”. Just two weeks ago, the company announced that “the internal committees” of the Patrimonium Middle Market Debt Fund had approved a loan of eight million euros. The expected commitment ensures the scheduled repayment of the bond and it is assumed that “all the planned components of the overall financing will be implemented promptly and finally”.

But now the subject of filing for bankruptcy is back on the agenda. Because the bond that Behrens has tried to refinance will be due on Wednesday. According to Behrens, it is uncertain whether it will still be possible to find an alternative that can be implemented within the statutory deadlines in the short remaining time. Therefore, consider filing for bankruptcy at short notice in parallel.

This could be related to a bad placement of the refinancing bond with a volume of 15 million euros with a coupon of 7.25 percent. The company issued this on October 30th. The exchange and subscription period expired in the previous week. With the silent participations, this should have been enough to repay the remainder of the old bond of around 16 million euros. But that was apparently not the case. A statement from J.F. Behrens has not yet been available.

Other issuers have also had recent difficulties in finding investors on the capital market. The project developer Pandion postponed its planned bond issue with a volume of 50 million euros. Although the marketing had got off to a very promising start, institutional investors had signaled that a subscription could be lower in the current environment. There is no current financing requirement.

The property portfolio developer Noratis carried out its issue, but was only able to sell around 12.5 million euros of the planned up to 50 million euros. The incoming funds are intended for the expansion of the real estate portfolio. In addition to a possible increase in the bond, Noratis would have further financing modules available. The anchor shareholder Merz Real Estate wants to invest a total of up to 50 million euros in equity by the end of 2024. In view of the stock market environment, we are satisfied with the placement achieved. With the need-based inflow, the next growth steps can be implemented as planned, said CFO André Speth.

There are currently still some bonds in subscription. The house builder Gecci, who is still in the design phase, had one of 8 million euros followed by another of this magnitude. In fact, the past few weeks have not been the best environment, according to the company. However, the schedule of the issue is geared towards having sufficient funds by the start of construction at the end of February. They are convinced that this will be the case and have always relied on the secondary market. In any case, the specialty chemist PCC is “very satisfied” with the drawings received so far, even if the bonds are not yet fully subscribed. The five-year bond with an interest rate of 4 percent is particularly popular.

The real estate project developer Euroboden also currently has a bond of up to 75 million euros on subscription. At the beginning of the month, the company had reported a good start, when old investors had accepted around 14.6 million euros in advance. On Monday, the specialist for upscale living culture in German cities followed a press release in which it emphasized that the company was not experiencing any adverse effects from the corona pandemic. The F.A.Z. CEO and partner Martin Moll had said earlier that there were delays of three months in individual projects. That is not nice, not even for the buyer, but it has no economic relevance.

This year, twelve plots of land with extraordinary potential have been secured, the company’s philosophy of “architectural culture” is valued by sellers and buyers and there are no delays in sales due to pandemic. The housing market in metropolitan regions is stable and crisis-resistant. The Euroboden bond with a coupon of 5.5 percent and a term of five years can still be subscribed until Friday.

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