H2O’s Windhorst-linked La Perla bonds set to be repaid
Fundraising from Italian lingerie maker will help repay bonds bought by asset manager
One of the illiquid bonds at the heart of the crisis that engulfed H2O Asset Management earlier this year is set to be repaid in full, after La Perla, the Italian lingerie maker, announced a €200m capital increase.
The London-based fund manager saw clients withdraw €8bn from its funds after the Financial Times revealed in June the scale of its holdings of bonds related to the German financier Lars Windhorst. While H2O met all of these redemptions and its chief executive Bruno Crastes vowed to “never gate” his funds, the asset management subsidiary of French bank Natixis still came under intense scrutiny.
One of those bonds was from La Perla, a lossmaking luxury underwear brand that Mr Windhorst acquired in February 2018 from Silvio Scaglia, an Italian entrepreneur and former legal adversary. The German businessman raised a €500m bond to back the acquisition, with H2O’s fund filings showing that it owned more than €300m of this debt at the end of 2018.
On Wednesday La Perla, which listed its shares on France’s junior stock market Euronext Growth market last month, announced it has binding commitments from investors for a €200m capital increase. A person familiar with the matter said that Mr Windhorst’s Tennor Holding is putting more money into the business along with several other investors.
La Perla also announced that it now intends to repay all of its bonds at face value. While €500m of bonds are outstanding, not all of these were placed with external investors, according to people familiar with the matter.
The repayment could help vindicate H2O Asset Management’s original valuation of these bonds. H2O marked down its La Perla bonds to just 25 cents on the euro in June, following the flood of redemptions, having previously valued them above face value.
Morningstar, the fund rating firm, questioned the “robustness” of H2O’s valuations of its Windhorst-linked bonds in June, in a critical report on what it described as the fund’s “loose risk controls”.
H2O and Mr Windhorst declined to comment.
La Perla went public in early September through a so-called “direct listing”, where stock is not sold to outside investors, giving it a market capitalisation of €473m. The stock is very thinly traded, however, with only one share changing hands on 11 out of the 29 trading days since the listing.
When La Perla floated it disclosed that H2O Asset Management already owned a 9.5 per cent stake in the company. While it is best known for investing in government bonds and currencies, H2O also has an equity-focused fund called Multiequities.
Fund filings show that in March 2019 more than 11 per cent of this Multiequities fund was invested in unlisted shares linked to Mr Windhorst, exceeding the 10 per cent threshold known as the “trash ratio” that restricts holdings of illiquid assets.
This counted as a “passive breach”, however, because it was due to a revaluation of its existing holdings. H2O later sold part of its stake in Mr Windhorst’s medical robotics company Avatera to get its fund back within the 10 per cent limit, according to people familiar with the matter.
While losses have narrowed since Mr Windhorst acquired La Perla, the company still booked a €91m operating loss last year. Accounts from its Dutch holding company show that the lingerie maker was bought from its previous owner for just €1. Mr Windhorst has denied this, saying that he paid “a significant double-digit million euro amount.”
Rather than creating a new holding company to acquire La Perla, corporate records show that Mr Windhorst purchased an existing Dutch entity from the Italian-born businessman Georg Kofler, who was formerly the chairman of German television station ProSieben.
Mr Kofler, a judge on the German reality TV programme Lion’s Den, told the Financial Times that he sold the Dutch vehicle for a “nominal amount”. He added that this made it “quicker and easier” for Mr Windhorst to complete the transaction.
The annual accounts of Mr Kofler’s Luxembourg investment vehicle show that he has previously invested in several companies owned by the German financier.
The Italian-born businessman said that Mr Windhorst is a “risk taker”, but added that he is also a “great entrepreneur”.
“If he offers me a good deal, I do it with him,” Mr Kofler said. “And the deals with him never failed. I always made good money.”