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Adler CEO Thierry Beaudemoulin said on today’s FY 2023 results call that adverse market conditions in the German real estate market are lasting longer than expected and have impacted the planned level of asset sales through to mid-2025. This has resulted in the need for a second restructuring process, he said, to address the company’s €6.4bn debt, more than two-thirds of which matures in 2025-2026.

He said the transaction market had “substantially dried out” in 2023, and expects the real estate market to pick up in Q2 2024. However, further price declines are anticipated during the second half of the year, he told callers.

The company generated gross proceeds from disposals of €530mn during 2023, with associated debt repaid of €270mn and net cash generation of €200mn. Adler has sold 1,150 rental properties during 2023, leaving the portfolio at 25,043 at year-end.

Adler’s gross asset value (GAV) for its yielding portfolio was €4.2bn at end-2023, down from €5.2bn at end-2022, driven by both disposals and the portfolio revaluations. The like-for-like value drop was 12.8% during 2023.

Adler’s development projects had a GAV at €1.6bn at end-2023, meanwhile. Last month, Adler closed the sale of the Wasserstadt Tankstelle development project in Berlin, generating double-digit euro net proceeds.

Meanwhile, Beaudemoulin said he expects to close the sale of Adler’s 63% stake in BCP by the end of the year; an investment bank is running the sale process. As of December 2023, BCP owns ~9,300 rental units with a portfolio book value of more than €900mn, and ~€180mn of development assets.

Adler’s cash at end-2023 was €377mn, including €105mn restricted cash mainly related to a temporary restriction at ADO Group Ltd (Israel), short-term capex and rolling interest reserves.

The company has €276mn of 2024 debt maturities, which refer almost entirely to asset-linked secured bank financing; extension negotiations are at an advanced stage and are expected to be agreed in Q2 2024.

Source documents:
FY 2023 report
FY 2023 presentation

As noted, Adler is in advanced talks with a SteerCo of bondholders about the restructuring, which will improve the group’s cash position, postpone debt maturities beyond 2026/2027, and provide enough equity to ensure a “solid foundation” for going concern status for at least two years.

The non-binding agreement struck with the SteerCo would see some of the company’s debt extended and subordinated, and bondholders ultimately taking ownership control.

A lock-up agreement could be finalised as soon as next week, sources said, with consent processes to follow. Implementation could be via a UK court process, meanwhile. Adler is targeting to complete the restructuring transaction by September this year.

The same advisors are in place for this fresh process: Adler is working with PJT and White & Case, and the SteerCo with Milbank and Hengeler.

In Adler’s restructuring process last year bondholders provided €937.5mn of first-lien 12.5% PIK funding due June 2025 and took 22.5% ownership. The funding was led by the SteerCo comprising BlackRock, PIMCO, Sculptor Capital Management, Silver Point Capital, Taconic Capital Advisors, and Schroders, which provided 80.3% of the €937.5mn new money, with other noteholders contributing the rest.

The new money was provided in return for preferential security over, and amendments to, the six unsecured bonds totalling €3.2bn maturing between 2024 and 2029. The 2024 bonds were extended to 2025, but the maturity dates of the 2025-2029 bonds were maintained. The new funding ranked first, followed by Adler’s 2024 notes, convertible notes, and Schuldscheine second, with the remaining notes ranked behind.

Adler implemented the transaction via a UK Restructuring Plan, although the sanction order was set aside by the Court of Appeal earlier this year after a challenge from a group of 2029 bondholders. Adler has since sought permission to appeal against the Court of Appeal verdict.

Adler’s bonds were little changed today, with the 2029s down nearly half a point at 37.125, according to Bloomberg pricing data.



Matt Dickinson
LevFin Insights



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