(Pitchbook) Pfleiderer bonds rally on hopes of SVP equity injection

06-Jun-2024 06:34:03 EDT

By: Thomas Beeton

Pfleiderer bonds have rallied up to seven points this week on the back of market speculation that owner Strategic Value Partners hasinitiated discussions to extend its debt maturities and potentially inject fresh equity into the business.

Bavaria-based Pfleiderer has €750 million of fixed- and floating-rate high yield bonds maturing April 2026 that slumped in the low 70s lastyear as higher interest rates affected construction and demand for home renovation products. Pfleiderer makes engineered wood productsused in kitchen, furniture and construction and was hit by softer sales and lower selling prices last year.

Rated B/B3/B, Pfleiderer’s 4.75% fixed-rate notes and a E+475 floating-rate bonds dipped to fresh lows of about 66 and 69.5 respectivelyin May, but ended last month at about 75 despite what sources said were poor first-quarter earnings mid-month which showed pricedeflation and soft volume.

Saahil Dey, senior investment analyst at Sarria, said the bonds still look attractive in the low 80s because earnings should improve asPfleiderer recovers from the impact of falling interest rates, describing the issuer a “good company with a bad structure.”

Tradeweb data shows Pfleiderer’s €400 million of 4.75% fixed-rate notes due 2026 currently trading at 82.125/84.75, which gives a bid-yield of nearly 17% and is the highest trading quote for the bonds since April 2023. The €350 million tranche of E+475 FRNs due the sameyear are meanwhile in a 82.75/85 market, according to Tradeweb, which is back to levels last seen in February.

“The message to the market is that SVP is committed to the business and is building an equity cushion below the bonds,” said Dey. “Whenthe bonds rise into the 90s, then they will do the refi.”

Pfleiderer was restructured in 2012 and listed in 2015 under owner SVP, who took the group private again in 2019. SVP declined tocomment.