German Retail, Travel Junk Bonds Plunge on Partial Lockdown Plan
2020-10-28 15:47:46.73 GMT
By Fabian Graber
(Bloomberg) — Bond prices for some of Germany’s best-known
high-yield credits took a hit on Wednesday, ahead of an expected
lockdown that looks set to close restaurants and curb travel in
Europe’s largest economy.
Beauty retailer Douglas GmbH’s 300 million euros ($352
million) of bonds due in 2022 plunged about 5 cents on the euro
to 84 cents, their lowest value since July, while fashion chain
Takko Fashion’s 285 million euros of notes due in 2023 fell
around 2 cents on the euro to 78 cents, their lowest price in a
month, according to data compiled by Bloomberg.
German travel company TUI AG also saw its 300 million euros
of debt maturing next year drop around 2 cents to 88% of face
value.
“The introduction of tougher restrictions in Germany will
put further pressure on TUI’s operations which are already
highly depressed as demand for travel related services remains
limited,” Mateo Salcedo, a credit analyst at Spread Research,
wrote.
The country’s Chancellor Angela Merkel urged citizens to
avoid non-essential private travel on Wednesday and pushed for
tougher curbs on social life such as closing bars, restaurants
and leisure facilities until the end of November. The latest
restrictions come as Germany braces for a surge in insolvencies
as a moratorium on companies seeking court protection expired
earlier this month.
A spokeswoman for Douglas declined to comment on bond
prices and said that the firm’s e-commerce platform helped it to
get through the first lockdown much better than other retailers,
according to an emailed statement.
A representative for Takko declined to comment, while TUI
did not immediately respond to a request for comment from
Bloomberg News.
TUI already received around 3 billion euros in state aid to
keep it afloat during the coronavirus pandemic and the company
is looking to raise an extra 1.5 billion euros through a
combination of asset sales and a rights issue.
Douglas, owned by private equity firm CVC Capital Partners,
re-opened most of its stores during the summer after a complete
shutdown earlier this year. Apax Partners-controlled Takko also
saw its business rebound after government lockdown measures
forced it to shut most of its 2,000 stores across Europe.