(Debtwire) Douglas subs surge on press reports flagging 2022 IPO prospect and muted Christmas sales decline
20 January 2021 | 19:08 GMT
Douglas’ bonds soared today (20 January) on the back of a German Manager Magazin press report noting the sales decline in its key Christmas trading period was merely in the single-digit percentage range. The German beauty retailer’s EUR 335m 8.75% senior unsecured 2023s gained 15 points to 84-mid today and the EUR 300m 6.25% senior secured 2022s improved three points to 98-mid, two buysiders said.
According to the report, Douglas’ CEO Tine Muller wants to close another 50 shops in Germany and around 500 in Europe. The article also stated the company could go public in 2022 with sponsor CVC’s Partner Alexander Dibelius keen to float Douglas on the stock exchange where online sales are valued more greatly than branch sales.
The press report also suggested Christmas trading fared well despite a lockdown in Germany since December, with Douglas branches there closed since 16 December. Germany accounted for 37% of group FY18/19 sales. The 1Q Christmas quarter is also a big one for Douglas given the seasonality of the business. Douglas’ 1Q18/19 quarter-end December contributed 53% of FY18/19 adjusted EBITDA, as reported.
The press report highlighted online sales were booming, at EUR 1bn for FY19/20, keeping the overall sales decline over Christmas in the single-digit percentage range. Douglas’ online business generated EUR 766m net sales for LTM 3Q19/20 with a 35.3% compound annual growth rate since FY09/10. The online business could attract buyers, as reported.
Douglas has engaged Goldman Sachs in a capital markets role, Lazard as its financial advisor, and Freshfields as legal advisor as it weighs options to tackle its 2022 debt maturities, as reported.
Buysiders have been waiting for a proposal from the company alongside the release of its 4Q19/20 results, two sources familiar with the matter said. The market has been debating since late last year whether the company would opt for an amend and extend or have to initiate restructuring talks.
The second liens will likely be fine as it would be hard for CVC to haircut the second liens without losing equity value, one buysider pointed out. "Online sales could be close to 1bn in FY19/20 and they can keep the level in 2021. This is going to look great in an IPO prospectus.”
With around EUR 300m available under the secured debt basket and with any new money needs expected to be under that limit, CVC can provide new money without needing SUNs' consent, the first buysider added.
“If they are trying to restructure creditors, there would be no way the CEO would be talking in the press about a 2022 IPO," independent special situations firm Sarria said. “It is important they paid the coupon and the CEO talks about EUR 1bn online sales and Christmas sales being down less than 10% plus the 2022 IPO. None of this would happen if they were kicking off Germany’s biggest test of its new insolvency regime. It wouldn’t happen in this order – they could do an A&E.”
Douglas is expected to report its delayed 4Q19/20 (full-year) results release for the quarter-ended September later this month. Bondholders last fiscal year received 4Q18/19 results on 18 December.
Loan investors may have already received monthly numbers while bondholders rely on the quarterly reporting numbers despite the first lien loans and senior secured bonds ranking pari-passu.
Sponsor CVC bought the company from Advent in 2015 with the Kreke family retaining a 15% stake.
Douglas declined to comment.
by Adam Samoon, Jou Yu and Chiara Elisei