Adler Group announces two-part bond offering to refinance 2021 notes

Adler Group SA has announced the first European high-yield bond offering of 2021, as it markets a dual-tranche unsecured deal comprising five- and eight-year tranches, both of which will be benchmark size and euro-denominated. J.P. Morgan (B&D) is sole global coordinator and joint bookrunner, with Barclays and Deutsche Bank fellow bookrunners.

Proceeds from the new bonds will be used to refinance debt through a tender offer. The company is offering to purchase any and all of its €500 million of 1.5% notes due December 2021, at 101.212. Those bonds were issued by ADLER Real Estate in late 2017 and are not callable. The tender offer deadline is 5 p.m. CET on January 12.

Banks are guiding investors to expected issue ratings of BB+ at S&P Global Ratings. Neither of the new bond tranches are callable but can be redeemed three months prior to maturity at par.

The group last year issued 3.25% notes due August 2025 through ADO Properties and 2.75% notes due November 2026 through ADLER Group, which closed on Jan. 5 at 105.625 yielding 1.86% and 102.735 yielding 2.23%, respectively, according to S&P Global Market Intelligence. The 2026 bonds mark the borrower's last visit to market, with a roughly €1.8 billion book raised for a €400 million ticket, and final pricing coming markedly tighter than initial price thoughts of 3.625% area.

In December 2019, Adler Group announced an all-share voluntary exchange offer for ADLER Real Estate and acquired a strategic minority stake in Consus. By December last year, its stake in Consus was up at roughly 94%.

The group says that at the end of Q3'20, its weighted average cost of debt was 3.2% but that it has since reduced this to a current 2.98% and expects this measure to decrease further going forward. The group also signed and funded a €130 million secured loan in December 2020. As of Q3'20, some 42% of its funding was through bonds, with 46% through bank debt.

The group had also realized €71 million of synergies as of Q3'20, which was at the top end of its €63 million-€72 million synergy guidance.

In December last year, S&P Global Ratings said that though Adler Group reported high leverage for the first nine months of 2020, its credit metrics were likely to recover by the end of that year. S&P added that: "Consus sold 25 projects to Groner Group GMBH and Partner Immobilien Capital Management for a total of €1.0 billion. We previously expected Adler to receive the proceeds by October, enabling it to repay outstanding debt and ease its leverage. We now understand from the management that most of it will be paid by the end of this month." The agency also flagged the need for the firm to refinance its 2021 and 2022 maturities, or else concerns regarding its liquidity would intensify.

The combined group is the fourth-largest European residential real estate company, with a significant footprint in the top-seven German cities, according to a presentation.