Disputed debt weighs on Europe’s private bond maestro

Mr. Windhorst’s high-stakes deals highlight the murky world of his go-to funding source: private placement bonds. These bonds generally have no credit rating, are lightly traded and lightly regulated. In this case, they represented a lifeline for Mr Windhorst after personal and corporate bankruptcies made it difficult for him to raise funds directly from banks, according to people familiar with the business.

Mr Windhorst initially refused to acknowledge his debts to ADS in his correspondence with the Journal, but in a statement on Monday he said he had reached a new confidential settlement with ADS regarding the debt. He declined to give details other than to say the amount he agreed to pay was “much less” than the $645 million stated in the previous settlement agreement.

“Amounts due in cash and bonds have been fully settled,” Windhorst said. An ADS spokeswoman declined to say whether there was a new deal or whether the debts had been settled.

Mr Windhorst, 42, started out as a teenage business whiz in Germany, went bankrupt after the dot-com crash, pleaded guilty to breach of trust in a criminal investment fraud case in Germany in 2009 and subsequently raised billions of dollars. moguls and fund managers for a range of startups.

Three years ago he was sued in London by investors for allegedly failing to settle bond transactions, leading creditors to temporarily repossess a yacht, his office in London’s Mayfair district and a private plane. A spokesperson for Mr Windhorst said the lawsuits had been settled.

In June, Mr Windhorst’s holding company raised 1.5 billion euros ($1.66 billion) which would be used to fund the purchase of stakes in soccer team Hertha Berlin and the fashion house British Ralph & Russo. He got the plane and the yacht back, and his current business empire includes medical robotics and esports companies as well as La Perla stores. Its holding company, Tennor Holdings BV, sponsors show jumping competitions attended by celebrities and European royalty.

Still, some big financial players shunned Mr. Windhorst’s bonds. Several large institutions, including Goldman Sachs Group Inc. and Citigroup Inc.,

will no longer do business involving Mr. Windhorst or his bonds, people familiar with the matter said. Both banks were previously exposed to potential losses on Mr Windhorst’s bonds through customer transactions, the sources said. Goldman and Citigroup declined to comment.

Then there’s H2O, an asset management arm of French investment bank Natixis,

which saw exits after investors worried about its exposure to Mr Windhorst this summer. H2O’s chief executive has made comments supporting Mr Windhorst in recent months.

ADS is a regional brokerage firm in the Middle East specializing in foreign exchange trading. Mr. Windhorst opened an account there in 2015, pursuant to a January 2019 settlement agreement. ADS granted him a $200 million line of credit; he used bonds and stocks of companies he controlled as collateral, according to the deal.

Things quickly turned south. In 2016, Mr. Windhorst’s main holding company suffered a cash crisis. He left ADS on the hook for deals he set up that were backed by assets he failed to deliver, according to a summary of events written by ADS’ lawyers.

The brokerage’s losses linked to Mr Windhorst forced it to be recapitalized with around $185 million from its shareholders – mostly Emirati elites – over several years, according to a person familiar with the matter. A spokeswoman for ADS said the company was in a “solid financial position”.

In October 2016, Mr Windhorst signed a personal guarantee covering the debts and committed to a payment plan with ADS, the agreement says. He re-pledged to repay the debt in a revised agreement in September 2018, which set the bill at $776 million, and in January 2019, which updated the figure he owed to $645 million. dollars. Both deals were reviewed by the Journal.

During ADS’ battle with Mr. Windhorst over debts, auditors Deloitte Luxembourg in 2017 retracted the certification of the accounts of a Windhorst investment company that ADS had seized in the litigation. Auditors cited false information about the investment company’s cash position, according to a summary reviewed by the Journal from a law firm hired by ADS.

Mr. Windhorst and Deloitte declined to comment on the matter, as did investment firm Sapinda Invest.

Mr Windhorst typically relies on 20 to 30 investors to buy his bonds, say people familiar with his businesses. These people, including some who bought bonds from him, said he sometimes makes side deals to buy back the bonds at a higher price at a later date.

One of the biggest buyers of bonds, according to public disclosures, was H2O, the asset manager owned by Natixis. Like Mr. Windhorst, H2O CEO Bruno Crastes owns a home in Monaco and occasionally spends time on Mr. Windhorst’s yacht, Global, and on his private jet, according to people familiar with the matter. A person familiar with Mr Crastes said all the socializing was for ‘business purposes’.

H2O, which has also invested in ADS bonds, declined to say whether it was aware of Mr. Windhorst’s ADS dispute.

In late June, H2O said it sold much of its €1.5 billion in Windhorst-linked bonds at deep discounts to meet investor redemptions after a Financial Times report detailing H2O’s financial support for M Windhorst.

H2O said its exposure is now below 500 million euros. Mr. Crastes, who declined to comment for this article, said in a video posted on the company’s website in June that Mr. Windhorst is “extremely talented” and “we do not subscribe to the debate around the supposedly outrageous of this case”. contractor.”

Write to Bradley Hope at [email protected] and Margot Patrick at [email protected]