Yesterday, Praktiker held its annual shareholder’s meeting in Hamburg. Unfortunately, I could not attend,but it seems to have been prime time entertainment for everyone who attended.
The story is quite interesting, Austrian shareholders, representing 15% had a majority in the meeting, as less than 30% of shareholders were attending. At first, they opposed the plan of the management to first increase the share capital and then bring in US Investor Anchorage with a “super senior loan” and pledging its most valuable subsidiary, max Bahr against the loan.
As a response, management told shareholders that they will go directly into bankruptcy protection i shareholders don’t agree.
At the end, the shareholders seem to have approved the plan to bring in Anchorage after a capital increase.
In parallel, I have been doing some background checks on Anchorage and the picture does not look really good. Anchorage as a “distressed debt” specialist was among others involved in the bankruptcy of traditional German car parts manufacturer Honsel.
“Distressed debt” sounds like a very neutral word, but the business model of those “sharks” is relatively “dirty”: they come in via a loan, but they structure the loan though covenants in a way that they can call the loan pretty soon if they want.Once they are in this position, they can then force the company into bankruptcy, wipe out shareholders and senior bond holders.
At praktiker, this look like “Shooting fish in the barrel” for Anchorage: The do not only get the most valuable subsidiary pledged, but the concept includes making the subsidiary even more profitable by taking over the best Praktiker locations, leaving the “rest” for the others.
So this strategy even improves the position of Anchorage to the disadvantage of shareholders and bondholders. In My opinion, the Austrian shareholders are “feather weights” in this fight against Anchorage.
Within my scenario analysis, I would weight the “bankruptcy, zero recovery scenario” within the next few years at 50% probability. From what I have seen, the super senior loan will even expire before the senior bond
As it looks now, the market seems to interpret the result of the annual meeting positively, this opens the opportunity to sell the bonds at a small profit which I will do.
How goes the famous line: “You have to know when to hold ‘em, you have to know when to fold ‘em”….