Behind Lars Windhorst’s scramble to repay H2O
Controversial financier has pledged to find half a billion euros in ‘weeks’
Lars Windhorst, the fast-living German financier, failed to appear in a London courtroom in June to respond to one of several lawsuits filed against him by aggrieved creditors.
“This is not good enough by Mr Windhorst!” complained the judge, Jervis Kay.
When Windhorst’s barrister explained that the 45-year-old, who spends much of his time on a private jet, was “not in the UK at the moment”, the judge warned that her client risked being held in contempt of court.
“You and Mr Windhorst are both living on borrowed time,” he added.
It was a stern rebuke from a judge. But for Windhorst the €65mn claim from Norwegian shipping magnate Kristian Siem was barely a rounding error in the sum of his unpaid debts.
Months earlier, his investment firm Tennor had missed a deadline to repay more than €1bn to H2O Asset Management, which ran into trouble after pouring ordinary savers’ money into Windhorst’s ventures, ranging from a film distribution company to a lingerie maker.
Having once overseen €30bn of assets, H2O slid into crisis in 2019 after the Financial Times exposed the scale of its outsized bet on Windhorst. Investors’ money is still trapped in the so-called “side pockets” H2O set up to isolate €1.6bn of these hard-to-sell assets.
After years of waiting for repayment, last month Windhorst pledged he would hand over more than half a billion euros to H2O “in the coming weeks”.
Windhorst does have a habit of escaping precarious situations. In his 30s, he avoided prison after receiving a suspended sentence in a high-profile criminal case and also survived a plane crash that claimed the life of one of the pilots.
Still, the current challenge is formidable. Tennor’s finances have been in disarray for years. Windhorst’s investment firm was briefly declared insolvent by a Dutch court last year and it has not filed audited accounts since 2018. Even that year’s financial statements are now in doubt: Tennor told its auditor in February that a material error meant they could “no longer be relied upon”.
Tennor told the FT that it “stands behind all of its financial accounting” and the correction in the 2018 accounts was related to the timing of a writedown.
Even if his €550mn payment to H2O arrives as promised, it would still only cover a third of investors’ savings trapped in the asset manager’s funds. Windhorst also stands to gain from the arrangement, because H2O is allowing him to settle much of his debt at a deep discount.
And after the financier’s previous repeated failures to repay H2O to schedule, many investors have lost patience.
Collectif Porteurs H2O, a group of disgruntled investors that includes insurance companies and wealthy individuals, is pursuing legal action.
The group’s legal representative Dominique Stucki described H2O’s relationship with Windhorst as “extraordinarily peculiar and unprofessional”.
“There is still no indication of how [H2O’s founders] Bruno Crastes and Vincent Chailley have ever tried to compel Lars Windhorst to pay what he owes to the funds,” the lawyer told the FT.
H2O declined to comment.
The talented Mr Windhorst
Crastes, the Frenchman who heads H2O Asset Management, once had a close bond with Windhorst.
The pair would discuss deals while dining together at private members’ clubs or aboard the financier’s 240ft-long superyacht. And after the FT first highlighted their close relationship in 2019, Crastes leapt to Windhorst’s defence, publicly praising him as “extremely talented”.
Even as rattled investors yanked €8bn from H2O’s funds in the wake of the FT’s report, Crastes and Chailley dove deeper into Windhorst’s world.
In 2019, H2O carried out big bond trades with a Windhorst-linked broker, in which the German financier himself was the ultimate counterparty. Tennor also quietly poured more than €100mn into a mysterious new fund that the asset manager christened “H2O Deep Value”, corporate filings show.
But after French regulators stepped in two years ago, H2O changed tack. The asset manager cut Windhorst’s direct line to its 57-year-old chief executive, according to people familiar with the discussions. The financier now deals with Crastes’s subordinates and the firm’s external advisers during restructuring negotiations.
H2O told the FT it had “reallocated resources” to allow “portfolio managers, including Bruno Crastes and Vincent Chailley, to focus on managing the funds [and] strategies and a separate dedicated team to work with our financial and legal advisers on the [side pocket] liquidation”.
Bringing in professional advisers has done little to salvage H2O’s Windhorst-related investments, however.
With the financier mired in fresh claims from creditors, the asset manager wrote down the value of the side pockets from €1.6bn to €1bn at the end of last year.
A few weeks later, Windhorst missed a deadline to repay €1.1bn to H2O. Instead, in lieu of any cash, he gave H2O just $106mn worth of convertible bonds linked to Israeli technology company Gett in January.
The taxi app start-up was then poised to go public at a $1bn valuation. But the planned listing fell apart shortly afterwards — because of Gett’s extensive exposure to Russia — and the company is now undergoing a debt-for-equity swap, crushing the value of the securities Windhorst handed to H2O.
The asset manager told the FT that its holding of the Gett-linked bonds is “currently valued at zero”.
Windhorst has remained tight-lipped on the specifics of how he has since supposedly cobbled together enough money to repay half a billion euros to H2O, beyond telling the FT that Tennor’s “diverse set of businesses across sectors and geographies have performed strongly in the first half 2022”. But he has spent much of the year travelling to Africa, striking new deals and reviving old interests on the continent.
In April, Windhorst’s long-struggling Sequa Petroleum acquired an interest in some Angolan offshore oilfields, through a new joint venture with Namibia’s national oil company (Namcor) and Nigerian entrepreneur Vincent Ebuh’s Petrolog Group.
Windhorst also recently took back control of African farming company Amatheon Agri, filings show, having previously disposed of his majority stake in the group that has operations in Zambia, Uganda and Zimbabwe.
Financial entanglements
Despite struggling to recover money from Windhorst, H2O has proved reluctant to launch litigation against him, in stark contrast with a growing number of other creditors.
Shipping magnate Siem, Manfredi Lefebvre d’Ovidio and Andreas Heeschen — three European entrepreneurs who have previously done deals with Windhorst — have all sued him personally in London’s High Court. In July, Abu Dhabi brokerage ADS Securities also filed a fresh claim in London against Tennor.
H2O has also had its own financial entanglements with several of these parties now suing Windhorst.
The asset manager’s side pockets include $64mn of bonds from ADS Securities, which alleges Windhorst failed to honour an agreement to hand over €27mn and shares in a US tech company last year.
H2O also previously invested in bonds from Ignition Investments, an entity linked to Heeschen, who was formerly the majority shareholder of German gunmaker Heckler & Koch. In his lawsuit, the 61-year-old businessman alleges that proceeds from Ignition funded a €33.6mn personal loan he made to Windhorst that has not been repaid.
In the case of shipping magnate Siem, H2O not only previously held bonds in one of his eponymous companies, but also allegedly agreed to engage in trades with him on Windhorst-related bonds.
In Siem’s €65mn claim against Windhorst, he alleged H2O agreed to buy €10mn of Tennor bonds from him in July 2019, offering to pay above face value for the securities. This is despite the fact that H2O had just written down the same bonds held in its own funds to just 23 cents on the euro days earlier, blaming a “market commotion” sparked by “deeply unfair” press reports.
The Norwegian businessman alleges H2O then “failed to purchase the Tennor bonds”, defaulting on the agreement, which Windhorst had agreed to backstop. H2O declined to comment on the allegations.
Tennor said it expects to settle with ADS “very soon”, but that Heeschen’s lawsuit is “without merit” and will be defended “vigorously”.
While the rush of lawsuits have further complicated efforts to repay H2O, there are signs the financier is close to reaching a detente with at least some of these other aggrieved creditors.
Heritage Travel and Tourism, a Bahamian investment vehicle linked to d’Ovidio, a Monegasque billionaire cruise magnate, won a €172mn judgment against Windhorst in London’s High Court last year.
A representative for Heritage told the FT it is “presently involved in what it considers to be very positive discussions with Mr Windhorst and Tennor Group, aimed at finding a way forward for the companies on which we share interest”.
And on Wednesday, Windhorst’s rescheduled questioning hearing in the Siem case was vacated at the last minute, sparing the financier from another court appearance.