Deutsche Mittelstand Real Estate (Demire) has reached an agreement with over 90% of its bondholders to extend the maturity of its €499 mln 2019/24 bond to the end of 2027.
The company has initiated the formal process to amend the bond terms in accordance with German law. This restructuring is expected to reduce Demire’s loan-to-value (LTV) ratio to approximately 40% upon completion of the refinancing.
In addition to extending the bond maturity, Demire will partially repay €49.9 mln of the bond's principal. The company will also launch a tender offer to buy back up to €159.6 mln of the remaining bonds at a maximum price of 76.25% of their face value.
To fund this repurchase, Demire's largest shareholder has committed to provide up to €100 mln in additional liquidity. A backstop agreement has been secured to support the tender offer, with bondholders able to participate for a 5% fee. If the repurchase is fully subscribed, the outstanding bond principal is expected to be approximately €240 mln.
Demire will adjust the bond's terms to reflect current market conditions, including a 5% interest rate starting in October 2024. Failure to meet the bond redemption schedule will result in additional fees.
To accelerate debt repayment, the company plans to sell assets through a structured placement program.
As of 30 September 2023, Demire owned a portfolio of 60 properties primarily focused on office space, with additional retail and hotel assets. The total lettable area of this portfolio was approximately 860,000 m2. Including the partial acquisition of the Cielo property in Frankfurt, the portfolio's estimated market value reached around €1.4 bn.
Demire plans to substantially grow its portfolio in the coming years, concentrating on properties that generate strong cash flow and offer opportunities for value enhancement. The company will divest assets that do not align with this strategy.
