Yesterday, DMRE announced that the company had successfully the terms and maturity of its corporate bond in a procedure under the German Bond Act. This comes after in the beginning of September, bondholders representing more than 90% of the aggregate outstanding principal amount of the bond agreed to the amendment and extension of the bond. The technical implementation has now taken place and the bond under the new conditions is already tradeable again on the Luxembourg Stock Exchange.
As agreed upon, DMRE repaid € 49.9m (10% of outstanding amount) at par on 22nd October. Further, the company repaid € 4.6m below par as part of a tender offer process. In addition to this, € 190.8 were also repurchased below par (76.25%) and cancelled following the communicated backstop agreement. On top of this, management aims to repurchase a further amount of € 1.3m on the basis of the backstop agreement soon.
With this, DMRE already redeemed € 245.3m, reducing the outstanding volume to € 254m. In the process, the company made use of a shareholder loan by Apollo to the tune of € 92.9m. Mind you, the maturity of the bond was extended to 2027 at an increased interest rate of 5%. Yet, management is incentivized to reduce the volume further going forward, given penalty fees of 3% if the bond is not reduced by another € 50m until YE '25 as well as 2% if it has not been reduced by € 50m until YE '26. Moreover, a PIK interest of 3% will kick in starting FY '27. On this basis, we expect DMRE to dispose further assets in order to shore up liquidity. Management is confident to close 3 deals until YE '24 und dispose overall € 50m until FY '25e.
Besides this, the company received positive news regarding the rating of its bond, which Moody's upgraded to Caa2 while changing the outlook to stable.
The stock remains undervalued given the significant and, in our view, unjustified NAV discount of 73%. Hence, we reiterate BUY with an unchanged PT of € 1.50 based on NAV.
+++ For further information on the company's strategy following the refinancing, there will be a roundtable discussion with CFO Tim Brückner on Wednesday at 11:00 a.m. (LINK) +++
ISIN: DE000A0XFSF0
