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Adler Group SA fell to a record low as the embattled German landlord left investors waiting for a detailed response to allegations of fraud set out in a report by short-seller Fraser Perring's Viceroy Research.
Since the allegations were first published in early October, the company hasn't addressed key questions raised by Viceroy in its first earnings report. The landlord then didn't take any questions on an investor call in the afternoon, accelerating a sell-off that sent its shares to a new low.
While Adler said that it had appointed KPMG's specialized accounting division to conduct an independent review of past transactions, that probe won't complete until early next year, and Adler left open whether and how it will share the results with investors. The group did not provide a detailed update on key asset sales designed to cut its borrowing or clarify progress on collecting money that is owed from past property sales.
The company, which has categorically rejected Viceroy's allegations without offering an in-depth rebuttal in almost eight weeks, instead pointed out higher rents and an 8.7% increase in valuations in the third quarter to try and assuage markets.
CreditSights senior analyst David Shnaps said there were lots of promises and little detail. Investors are waiting for clarity again. Adler fell as much as 22% after the call and traded 19% lower at 3: 56 p.m. in Frankfurt, leaving the stock down 69% this year. The 800 million-euro note due in 2029 fell 3.1 cents on the day and is currently bid around 81.5, according to CBBT prices.
Instead of confronting Perring's allegations in detail, Adler has announced the sale of about 40% of its portfolio in a move designed to raise cash, ease financing pressure and confirm its valuations, which have been called into question by Viceroy.
The company said on Tuesday that the first sale, a 1.4 billion-euro portfolio, will be sold to rival landlord LEG Immobilien by the end of the year. The deal was first announced in October. A second, roughly 1 billion-euro sale will conclude in the first quarter of next year, Adler said.
The family of Cevdet Caner, who has a minority stake in Adler, has filed a criminal complaint against Perring, who accused the Austrian entrepreneur of being the real guiding force behind the company. Adler made no mention of Caner in his earnings statement.
Another area of contention is the company's receivables, including funds it is owed from historic property sales. Adler said its selected financial assets, including receivables, were 563 million euros at the end of September, after a decision to sell a major development in Duesseldorf to a company owned by Caner's brother-in- law. That is down from 735 million euros at the end of June.
The company has 396 million euro of cash on its balance sheet, enough to pay for a 170 million-euro note due this year, along with a few smaller positions. Bloomberg reported earlier that Adler had drawn down the full 300 million euro of a revolving credit facility it has with banks.
Under the terms of the company's bonds, financial indebtedness must not exceed 60% of the value of its assets. That metric is currently at 53.4%.
A further 855 million euro of debt will fall next year. Adler said it was in advanced talks to extend loans totalling 237 million euro, with a further 619 million euro due to be repaid when ongoing property sales are completed.
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