German Medium-Sized Bond Issuers Avoid German Government Loans

The financial reports of medium-sized bond issuers in Germany published in 2020 were evaluated and analyzed by URA Research. The URA ratings for 7 bonds were confirmed. According to the report from Munich, the assessment has improved for 1 bond and deteriorated for 10 bonds.

The 3rd bond from Karlsberg Brauerei GmbH and the 6th bond from Neue ZWL Zahnradwerk Leipzig GmbH were newly included in the URA monitoring, reports Jens Höhl, Managing Director of URA Research GmbH.

URA Research notices the development of net financial debt in the observed companies. URA Research defines net financial debt as financial debt minus liquidity. “After all, half of the 13 issuers observed who published interim reports as of September 30, 2020 or at least June 30, 2020 were able to reduce their net financial debt or maintain their existing net liquidity.”

According to URA Research, in 2020, almost half of the issuers were also able to achieve a positive free cash flow so far. URA Research defines free cash flow as the inflow of funds from ongoing business including net interest income minus investment balance.

Missing inflows of funds due to the Corona-related slump in sales could therefore be at least partially offset by cost savings such as short-time work or the suspension of temporary work, by releasing funds in working capital and lower investments. This also fits in with the fact that only a few issuers use government loans. URA Research has no other findings on this.

The “URA stress test” for 45 companies monitored by URA Research shows a similar picture: here, too, almost half had a green light in this sense that it is estimated that the liquidity will last longer than 720 days (ie 2 years) after a 12-month sales decline of 25%. With a 50% drop in sales, it was still a good 15% of the companies.