Conference Magazine - GoingPublic.de - Deutsches Eigenkapitalforum

Bond Issuance
Photo: Deutsche Börse AG
quarterly reports. PLCs (“GmbHs”) that are not listed in particular
still have to deliver on this. We would certainly like to
see one or two additional reports from them. They are more
than happy to take the cash at the time of issue. But then,
you hear nothing more from them for a long period of time.
That’s not the idea. A different kind of investor understanding
needs to be introduced here…
Conference Magazine: …because?
Wegerich: …because these issuers will undoubtedly want
to trouble the capital market again in five years time, as they
cannot pay back their first bond from their cash flow,
regardless of whether they believe this themselves or not.
And it is for this precise reason that it would be good to
keep in contact with investors, and not just when everything
is about to go belly up.
Conference Magazine: Isn’t this what we normally employ
IR agencies for, though? How much can they achieve?
Wegerich: That’s very tricky. When the agency is pressing
on about the points addressed, issuers are asking themselves
whether the agency is perhaps just delivering a sales
talk and they don’t see it as honest advice. Issuers are very
cost-sensitive in this regard. The cost/benefit understanding
has not sunk in everywhere yet when it comes to this
point.
Page 56 Deutsches Eigenkapitalforum 2012
Conference Magazine: What we can establish, though, is
the fact that direct offerings (self-managed issuances) are
dragging. Is this also a topic that warrants communication?
Wegerich: That’s a massive understatement. Off the top of
my head, I can’t think of a single direct offering that was
launched on time. How on earth is it supposed to work? An
issue is a complex process. How can anyone imagine that it
could be a do-it-yourself job? Almost an entire market of
services would no longer be justified as a result. Direct
offerings simply do not work well, and that’s a fact.
Conference Magazine: If we move back to transparency
and consequences, which covenants are indeed essential
and which ones are, simply put, nonsensical?
Wegerich: Mea culpa: At the moment, I think more highly of
some covenants, but I have good reason for doing so! For
example, the covenant concerning a certain equity ratio.
This should not just be paid lip service, but it must actually
mean tolerating a corresponding degree of watering down
as a result of the necessary increase in equity. In the case of
issuers that are not listed, this means taking on board additional
shareholders, if necessary.
Conference Magazine: …therefore capital measure instead
of extraordinary right to terminate?
Wegerich: The investor’s right to terminate is naturally not
the right option, as the company already has obvious
problems. No, borrowed capital must then become equity,
with all the consequences for the issuer. Originally, that was
what the credit clause was for.
Conference Magazine: Don’t many issuers mistake equity
for bonds, anyway?
Wegerich: Yes, definitely. In many cases, we as investors
had to say, “People, if you want to sell this story, then we
also want to be there for the upside. That won’t work
going down the bond track; that’s an equity story!” And
yet it was precisely these bonds that were placed. This is
due to the hype, albeit partial, that we discussed. And
now, we’ve come full circle; we’re back to what I said at
the beginning.
Conference Magazine: Thank you very much for talking to
us, Mr Wegerich!
The interview was conducted by Falko Bozicevic.