German furniture maker Schieder Moebel Holding and lead managers Citigroup and WestLB yanked a planned €145 European high-yield offering last week. The deal had first been postponed following the London terror attacks earlier this month and last week was pulled for good after the banks could not round up enough commitments at the 10 1/4 to 10 1/2% range for the seven-year, non-call four offering.
Investors felt even the plus-10% coupon being offered did not compensate them adequately for what they perceived as equity-like risk. "The company is in a fairly cyclical industry with low margins and is planning to use the proceeds of the deal for greenfield expansion into Russia and China. This is an equity story if anything," commented one London-based investor.
"This is what happens when you have a price-sensitive company with other funding options," observed an official at one of the leads, who confirmed the deal has been pulled and the company will fund itself in another manner. He noted an additional challenge was lack of investor familiarity with Schieder furniture outside of Germany. "If you're familiar with a company's product, you'll demand a lower risk premium; on this deal the company was appealing to a broader European investor base." Andrew Watkins-Ball, head of high-yield syndicate at Citigroup and Morton Llewellyn, head of high-yield capital markets at WestLB, did not return calls by press time.
Franz Josef Golueke and Samir Jajjawi, managing directors of Schieder in Herford, Germany, could not be reached by press time for further comment, though the company issued a statement citing unattractive yields as the reason for pulling the deal.
