Adler bondholders step up fight after internal cash shift

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(Bloomberg) – A group of Adler Group SA bondholders have escalated a tussle with the beleaguered owner, urging a subsidiary’s management to quit after a recent real estate deal that investors say could make it more difficult for them to get their money back.

The creditors, which include hedge funds such as GLG Partners that hold bonds issued by Adler Real Estate, wrote in a letter to unit management that they were concerned the transaction was made “unrelated to addiction “.

The deal, in which Adler Real Estate paid its parent company 326 million euros ($339 million) for a portfolio of Berlin apartments, drains the subsidiary’s cash and could threaten the repayment of a debt obligation. 500 million euros which is due in less than 12 months, they said. in the letter, sent last night by their law firm and seen by Bloomberg News.

A representative for the Adler Group declined to comment.

Different groups of creditors have been squabbling over the best position to recover their money after an Adler-initiated review by KPMG could not refute all allegations of short sellers. Chairman Stefan Kirsten said in a newspaper interview this week that the company’s liquidation is one possible outcome of a strategic review begun after its auditor left, and financial watchdog BaFin said that he was investigating the company.

Read more:

Adler says liquidation is an option after short sellers attack (1)

Adler Real Estate transfers money to parent with sale of assets (1)

Adler real estate bonds fall as withdrawal process begins

Adler creditors jockey for a position in talks with management

Adler has more than 7 billion euros in outstanding debt, issued in part by subsidiaries such as Adler Real Estate which were stand-alone companies before being combined in a controversial three-way merger two years ago. Adler Real Estate raised some €1.1 billion in bonds prior to the deal.

Kirsten, in the interview with Boersen-Zeitung, said her goal was to consolidate income-generating assets within Adler Real Estate and transfer cash to the parent company level. Adler also announced that he would eliminate minority shareholders from the real estate unit, a plan seen as facilitating cash transfers within the company.

Kirsten dismissed concerns from bondholders about cash transfers within the group, saying he had a responsibility to all stakeholders and not just to any particular group.

The letter now sent by law firm Kirkland and Ellis says Adler Real Estate should consider appointing independent directors to the board or, at the very least, seek independent legal advice.

It also requires the company to publicly explain which assets were sold by and to whom, what information about the assets the subsidiary received from the parent before the sale, and which advisors were involved in the due diligence. Creditors also want to know who requested the asset valuation and how the company plans to approach upcoming maturities.

If their demands are not met, they said they would consider their legal options.

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