Bloomberg) -- Just two months ago, German beauty retailer Douglas GmbH was on the brink of a debt restructuring and closing 500 stores. Now, it’s won a multi-billion-euro lifeline.
Douglas, owned by CVC Capital Partners, has reached a 2.4 billion euro ($2.8 billion) refinancing and equity deal this week as investors put their faith in Germany’s economic re-opening.
It’s another example of the junk bond market running hot as investors clamor for anything with a yield and are willing to overlook things that would ordinarily be a red flag, like falling sales and shuttered stores -- all issues that Douglas is facing. Just a year ago, the company’s debt was trading at around a third of its face value.
“If the market is supportive of a name like Douglas then it may pave the way for other similar companies to do the same, so we could potentially see more aggressive deals come to market in the coming months,” said Jeff Mueller, Eaton Vance’s co-director of high-yield bonds, who helps manage $486 billion.
Officials at Douglas and CVC declined to comment on the refinancing.
Investors did demand higher pricing to compensate for the risk they’re taking on, and the company had to increase the size of the most expensive portion of the debt.
“As much as European leveraged finance conditions could be described as an issuer’s market right now, rising case counts and extended lockdowns in Germany, France and Italy in recent days should not be overlooked,” said Neill Keaney, a credit analyst at CreditSights in London.
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