Spotlight on: Corestate

Over nine years, the Reorg team has analysed thousands of performing and distressed credits. Our expert team of financial analysts, legal analysts and journalists produce granular capital structures, primary analysis, tear sheets, waterfall models and more.

With long and deep connections to credible sources, we publish up-to-the minute news to help you stay ahead. In this case study, we’re highlighting one example showcasing the ongoing credit insights that Reorg’s team provide day in, day out to enhance efficiency and improve decision making for more than 25,000  investors, advisors and lawyers.

Corestate: The German real estate manager’s bonds have declined more than 30 points in April and May 2022 as Reorg’s editorial trifecta (legal and financial analysts along with investigative reporters) came together to publish various stories outlining the issues faced by the group. 

The group faces €500 million of maturities in 2022-2023 with a possibility of a restructuring looking more likely than ever. 

September, 2020 

Reorg initiated coverage of Corestate by detailing the company’s  €300 million bond which had declined sharply from 80 on Aug. 10 to the low 60s by Aug. 20 after the group reported its second-quarter results. Between September 2020 and March 2022, Reorg continued its regular coverage of  the latest developments, analysis and earnings.

March 30, 2022

Reorg published a breaking story as Corestate postponed the publication of its 2021 annual report due to renewed impairment test of goodwill related to its mezzanine lending business HFS.

April 1, 2022

Reorg published a scoop regarding Corestate looking to appoint advisors. The story said Corestate would consider alternatives such as an amend and extend among others if the cash conversion plan is delayed, or if it is unable to refinance the 2023 bonds in a timely manner given a challenging primary market in the light of Russia’s invasion of Ukraine.

The group’s 2023 bonds declined more than 10 points from 80 to about 70.

April 4, 2022

Reorg published an analysis highlighting €500 million maturities in 2022-2023 and potential delays in the group’s cash conversion plan. Reorg highlighted that for Corestate to tackle its maturities, a lot has to go right for the group which seemed challenging. The analysis also highlighted Pimco held about 50% of the 2023 bonds and 25% of the 2022 bonds. 

After the publication of the analysis the group’s 2023 bonds fell more than 10 points to about 57.

April 11, 2022

Reorg published a covenant analysis outlining how the asset sale covenant and director liabilities under German Law may restrict the group redeeming its 2022 bond prior to finding a solution for the 2023 bond.

April 20-21, 2022

Reorg published Corestate 2021 annual report highlighting a €175 million goodwill impairment at HFS which more than halved 2021 EBITDA to €42.1 million. In a follow-up story, Reorg also highlighted additional risk provisions related to bridge loans due to at-risk collectability and a delay in completion of the Giessen disposal. 

April 26, 2022

Reorg published a ratings alert as S&P downgraded the group to CCC on cash accumulation delay and refinancing risk. 

May 5, 2022

Reorg published a balance sheet liquidation valuation of Corestate highlighting unsecured debt recovery at 52%, though most assets on balance are illiquid and realizing value from them could take a long time. The analysis highlighted that risk provisions on bridge loans increase the likelihood of a restructuring. The analysis discussed the concerns around the bridge loans and Stratos funds in depth and analyzed each of the key balance sheet line items. 

May 6-10, 2022

Reorg published a scoop highlighting Corestate bondholders led by Pimco have mandated Houlihan Lokey as financial advisor and Milbank as legal advisor for a potential restructuring as a refinancing of the German real estate manager’s looming maturities seems increasingly unlikely.

May 9-10, 2022

Reorg published that Corestate has mandated a financial advisor and will evaluate alternative options for its 2022, 2023 bonds. The group also withdrew its 2022 guidance and delayed its cash conversion plan due to difficult market conditions.

Reorg concludes that owing to repeated delays in the group’s cash conversion plan and in the absence of any support from shareholders Corestate would have to restructure its upcoming €500 million bond maturities. However, despite the 2023 bonds being in high 40s, the group continues to stress it is in talks with banks regarding a refinancing although it recently admitted it would evaluate alternative options and has mandated a financial advisor.

Noor Sehur Senior Analyst neshur@reorg.com