Windhorst Restructures H2O Debt He Was Supposed to Buy Back

German financier Lars Windhorst’s Tennor Holding struck a deal with H2O Asset Management to restructure the debt held by the investment fund that he was supposed to buy back.

The transaction includes the issuance of 1.45 billion euros ($1.77 billion) of new notes due next year to retire debt linked to companies owned by Tennor, held by H2O and smaller bondholders, Windhorst said in a statement to business partners and clients seen by Bloomberg. Some details of the deal were also published on Tennor’s website on Saturday.

Under the agreement, and subject to certain conditions, equity stakes in Windhorst’s Avatera Medical NV and La Perla Fashion Holding that guaranteed the old debt will be transferred back to Tennor. The new super senior secured notes will pay 4.5% interest and will be secured by entities in the Tennor group, according to the statement.

An official at H2O declined to comment on the deal. A representative for Tennor declined to provide further details.

The restructuring of the bonds is the latest step in a two-year back-and-forth over the illiquid bonds sold by Windhorst-linked companies that triggered severe fund outflows for H2O, once part of Natixis SA’s asset management stable.

Buyback Deal

Last year, H2O agreed to sell the investments back to Windhorst in several steps, seeking to complete the transactions by next month. The buyback deal struggled to take off as the French regulator ordered H2O to freeze funds over valuation uncertainties, while Tennor couldn’t raise sufficient new financing and monetize investments. Only in March this year he reached an agreement to sell Tennor’s controlling stake in Fyber NV, a digital advertising company, to line up funds.

Read more: Lars Windhorst Clinches $600 Million Deal Ahead of H2O Repayment

In the summer of 2019, H2O suffered 8 billion euros of fund outflows sparked by investor concerns about holdings of thinly-traded notes linked to Windhorst.

After the buyback deal was agreed, Bloomberg News reported that Windhorst had secured financing to repurchase some of the notes at a discount of about 50% via a new bond dubbed Evergreen Funding. The notes have since been retired.

H2O’s investors were trapped for some time because the French regulator intervened and ordered the company to halt redemptions from some of its portfolios due to valuation uncertainties. H2O marked down the value of those investments repeatedly. In January, the fund’s shareholder Natixis SA decided to sell its stake to management.

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