Maturity: July 15, 2011
Issue price: 96.331
Call option: at 105.25% from 15/07/08; at 102.625% from 15/07/09 and at par from 15/07/10
Spread at launch: 656bp over the 5% July 2011 Bund
Launched: Wednesday June 30
Lead mgr: Deutsche Bank
?...the issue has been struggling and pushing the release of price talk back a couple of times. Dürr?s comparables have been trading poorly ? Schefenacker is hovering round the 85 level and Taksid is trading in the low 90s.
The story itself is also troubled: the company is going through a large restructuring programme but they are not transparent on how they plan to move from one step to the next. Their numbers are also opaque due to restructuring charges.
However, the market has a vested interest in making German deals work since it is where the growth of the market is.?
?...Dürr is a well known credit in Germany and I have followed it for several years.
The acquisitions that the company made over the last few years now need to be integrated, and it is on track with doing that. The new management of the last two years has also shown that it is able to reduce debt.
Although it is a cyclical business, there is a long way between incurring orders and production, making it predictable. I see no negative surprises for the next two to three quarters.
I was very surprised the bonds were priced to yield 10.5%, compared to the initial 9.5% talk.
We received a good allocation and I bought some more bonds in the secondary market at just under 96, it is now trading in the 96 area but I expect it to trade up to par in the next two to four weeks because of huge retail demand in Germany.?
?...this bond is unexciting and I see no reason why we should get involved with the credit since it is unlikely to dramatically de-lever any time soon.
However, it is more a sector rather than credit specific issue. The performance of auto suppliers such as Schenfenacker and Taksid have been poor lately and it is a tough sector to play.?
?...we didn?t get involved as we are negative on the sector ? suppliers are being squeezed by auto companies as they try to cut costs. Durr has limited pricing power and makes little profits.
The management is also new and untested. Although it is not a matter of price, the bond does look expensive relative to where other European auto suppliers are trading.?