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How Natixis's H2O Funds Are Linked to German Financier Windhorst

How Natixis's H2O Funds Are Linked to German Financier Windhorst

(Bloomberg) -- Natixis shares have slumped almost 14% since a ratings firm flagged concerns about holdings of illiquid instruments linked to controversial financier Lars Windhorst by its part-owned fund manager H2O Allegro.

Who’s Windhorst?

Famous in the 1990s in his native Germany as a rising star of finance, his subsequent track record proved patchy. He filed for personal bankruptcy in 2003 and one of his investment companies became insolvent in 2009.

He reappeared with Sapinda Holding, recently renamed Tennor Holding, which came to rely on private bond placements to raise money rather than conventional bank financing. H2O has emerged as among the biggest buyers of this debt.

H2O’s Chief Executive Officer Bruno Crastes on Friday left the advisory board of Tennor, which he joined in April. However, Crastes’s links to Windhorst stretch back to 2015, he said in a television interview on Friday. A year later the money manager contributed to a rescue loan for Sapinda.

H2O said in a statement on Thursday that Windhorst “has proven to be a reliable business partner.” It also stood by its investments in the debt linked to him, saying it had not been “blindfolded” in its decisions.

A spokesman for Windhorst declined to comment on the relationship with H2O and the holdings. Officials for H2O declined to comment.

What’s in the portfolio?

Here is the list of bond holdings linked to Windhorst in the 2.2 billion-euro ($2.5 billion) H2O Allegro fund, as of the end of December. The same bonds were also held in other H2O funds, according to filings.

BondMarket ValueNominal Value
Amatheon Agri2,169,3912,700,000
Chain Finance19,731,26727,000,000
Civitas Properties25,459,72626,400,000
Degros Holding5,312,5345,000,000
La Perla25,639,53525,000,000
SWB730,8761,000,000
Trent Petroleum22,166,72522,000,000

H2O sought to reassure investors and analysts on Friday, telling them they shouldn’t regard all the positions linked to Windhorst as interrelated as that they fall into a range of sectors.

“We are somewhat irritated by the suggestion not to look at the Windhorst group context and focus on the exposures to the local operating entities instead,” analysts at Autonomous Research wrote in a note after the call.

H2O has also released a statement saying the holdings are no different to collateralized securities where cash flows are regularly distributed to investors who then get all their money back at maturity. At least some of the holdings, however, have rolled over into new notes rather than pay out at maturity.

In one example, Chain Finance, a bond collateralized against some of the companies invested by Tennor, was used to refinance Horizon One -- a one-year loan for the rescue of Sapinda which in 2016 came close to running out of money. H2O has been an investor in both Horizon One and Chain Finance.

The Windhorst-linked bonds were held by a handful of investors and, in some instances, traded in transactions where he was one of the counterparties, according to court filings. As part of the transactions, Windhorst would sell and buy back bonds at a pre-agreed price. After reneging on some of these arrangements, Windhorst faced a series of lawsuits from backers including billionaire Len Blavatnik, insurer Assicurazioni Generali SpA, and Italian businessman Silvio Scaglia.

Italian Lingerie

Debt issued by Italian lingerie maker La Perla is one of the largest holdings across the H2O portfolios. The notes were sold by a Dutch special-purpose vehicle to back Sapinda’s acquisition of the company last year from Scaglia, with whom Windhorst reached a settlement in 2017.

The company had been losing money for years, and in 2017 reported a 110 million-euro loss before interest and taxes against 134 million euros of sales, according to bond marketing material. H2O marked the notes above par in December, according to a filing.

Another of the Windhorst-linked holdings in the H2O portfolios, Amatheon Agri Holding NV, highlights a potential discrepancy between how the fund values it and market prices. H2O Allegro marked its 2.7 million euros of holdings related to the farming company at about 80% of face value in December.

The bond, however, had been extended into a new note due July 2019, and eventually swapped into equity this week. The restructured bond was quoted at about 30% of face value in December, according to data compiled by Bloomberg.

How Natixis's H2O Funds Are Linked to German Financier Windhorst

--With assistance from Lucca de Paoli, Nishant Kumar and Thomas Beardsworth.

To contact the reporter on this story: Luca Casiraghi in London at lcasiraghi@bloomberg.net

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Chris Vellacott

©2019 Bloomberg L.P.