Wirecard crisis breaks up bond investors’ millions in losses


The crisis with the payment service provider has also pushed down the prices of outstanding bonds.

(Photo: dpa)

Frankfurt KPMG’s auditors have been keeping Wirecard shareholders in suspense since October 2019. A special check should clarify whether there is anything wrong with the allegations of balance sheet manipulation against the payment service provider. The share price went up and down.
Klaus Göggelmann apparently saw an opportunity in the uncertainty among investors. The fund manager bought convertible bonds from Fisch Asset Management in Zurich in the first quarter of 2020 for around 28 million euros from Wirecard, according to market data from the financial service Bloomberg.

The bulk, around 25 million euros, was put into the portfolio of the around one billion “Fisch Convertible Global Defensive Fund” (WKN: LU0162829799), a fund that, as its name suggests, advertises with a defensive investment strategy. The Zurich asset manager suddenly held three percent of the outstanding volume of the convertible bond.

If Fisch AM continues to hold the papers, fund manager Göggelmann should regret his commitment in view of the lack of 1.9 billion euros in cash and the resignation of Wirecard CEO Markus Braun. The convertible bond has lost more than 80 percent since the beginning of the year. Fisch Asset Management did not want to comment on request.

In addition to many equity funds that have suffered losses with Wirecard papers, the collapse of the payment service provider has also caught numerous bond investors cold. Wirecard currently has two interest bonds outstanding: a conventional bond with a volume of EUR 500 million and a convertible bond in the amount of EUR 900 million. The group from Aschheim had issued the latter together with Softbank.

Convertible bonds reach their limits at Wirecard

However, Softbank apparently passed some of the convertible bonds on to the secondary market. According to Bloomberg data, numerous specialized funds made use of it: in addition to Fisch AM, for example, the asset management of the Liechtensteinische Landesbank as well as funds from DWS and Credit Suisse. Wirecard converters were also recently included in the “SPDR Refinitive Global Convertible Bond ETF”.

Convertible bonds promise the best of both worlds: the price potential of a share and the security of a bond. But in the Wirecard case, this promise reaches its limits. If the share price exceeds a previously agreed threshold, convertible bonds are exchanged for a fixed number of shares. At Wirecard, the Bloomberg threshold was around 210 euros.

If the threshold is not exceeded, investors will get the nominal value of the bond back at the end of the term. But the Wirecard investors do not seem to believe that they will see the money again at the end of the 2024 term. Since the beginning of the year, the price of the convertible bond has dropped from around 80 euros per 100 nominal value to below ten euros in the meantime. The price losses of the convertible bond are therefore just as high as the losses on the share.

So far, investors in the regular bond have got off a little more lightly. Nevertheless, the paper is currently traded at a discount of more than 70 percent to the nominal value. This is how investors are pricing in Wirecard’s severe crisis. The rating agency Moody’s had also withdrawn its rating for Wirecard on Monday.

According to Bloomberg data, two German pension funds, which were probably sold primarily to private investors, held larger positions: the “apo VV Renten – Privat” (WKN: A1JZLC) and the “Voba Pforzheim Premium R Fund” (WKN: A0M8WY). Measured against the volume of the two funds, however, the positions in Wirecard’s interest-bearing paper were small. A spokesman for the fund service platform Universal Investment referred to the external fund managers, who left an inquiry unanswered.

After all: Both the bond and the convertible bond were issued with a denomination of EUR 100,000 per bond. Small savers should therefore have been spared the fall in the price of the bond.

More: How shortsellers bet against Wirecard.

Leave a Comment