Vulture funds plan to restructure Grifols debt | Companies

A new front opens for the Grifols. The company’s publicly traded bonds are at the center of speculative attacks by opportunistic funds. Sensing trouble, these funds are preparing to take on that debt, financial sources say. They expect the report on Gotham City to force the company…

A new front opens for the Grifols. The company’s publicly traded bonds are at the center of speculative attacks by opportunistic funds. Sensing trouble, these funds are preparing to take on that debt, financial sources say. They expect the Gotham City report to expose the company to more debt than admitted, complicate its plans to refinance liabilities, and then force the company to undertake a complete restructuring.

Grifols’ high net financial debt of $9.4 billion as of June 31, according to its half-year financial report, has been one of the market’s warning signs for the Catalan company for several months. In fact, since September, major funds and banks specializing in companies with financial problems have included Grifols among companies to watch closely. After the Gotham City report was released, things accelerated.

The company already expects to repay its first obligations next year, in 2025, for 2000 million in bonds and another 900 million in the form of a bank loan type mixing. Their plan was to avoid refinancing and pay off all debt in cash. To achieve this goal, they proposed a plan for cost cutting and operational improvements, combined with the sale of parts of the business to raise capital. The company has already sold 20% of its Chinese subsidiary and received $1.6 billion, which it said will be used entirely to pay down debt. And it is considering moving away from more areas, such as diagnostic and plasma collection centers.

The Gotham City report, released last Tuesday, has created some obstacles along the way. The company’s debt has become one of the main attacks of the bear fund. Finds that the company’s actual liabilities significantly exceed its current liabilities and that the company used one of its shareholders, Scranton Enterprises, co-owned by the Grifols family, to hide the group’s accounts, reduce debt and artificially increase EBITDA. According to the newspaper, this issue is at the heart of an investigation initiated by the National Securities Market Commission (CNMV).

In this context, opportunistic funds targeted the Spanish company. Sources interviewed said they are contacting investment banks and law firms to position themselves for the company’s listing obligations. They point out that the price of bonds is still too high for them to be forced into them as debtors, but their idea is to prepare for the possibility that the market punishment will continue and current bondholders will decide to flee.

The ultimate goal of these funds is to become strong creditors and force Grifols to restructure. This includes forcing Catalans to sell assets, refinancing their current bonds to others that pay higher interest, or ultimately forcing shareholders to give them all or part of the capital. On the other hand, it is expected that the problem of bank debt will be easier and that businesses will be more willing to reach an agreement on possible refinancing until the ECB forces them to provide their loans. In this case, they will not hesitate to sell their liabilities to opportunistic funds and flee the company.

The market is beginning to predict that Grifols will not be able to meet its cash debt repayment plan. The first concern that explained Friday’s stock market decline is that Haier will back away from buying Chinese businesses. They also fear that in the midst of this mistrust, Grifols will not be able to sell more assets or that the CNMV will force it to restate its accounts, causing metrics to slip and breaching financial commitments agreed with banks and bondholders.

Something that begins to be reflected in the price of bonds. Those expiring in 2025 have seen a milder decline. 1000 million, which pays 3.2%, fell from 98% of par to 94%, and 905 million from 1.62% fell to 96%. Other emissions are more harmful. The $1,400 million due in 2028 is trading at 82% after losing more than 10 points in a week, while the $705 million due in the same year is trading at 85%. Default insurance soared to 570 basis points.

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