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By Martin Spieler, July 5, 2018
Many factors of uncertainty: The Schmolz + Bickenbach steel company is not intended for security-conscious investors. Photo: iStock
The steel company Schmolz + Bickenbach has just issued a bond with a four-year term and a high interest rate of 5.625%. It's almost impossible to get anywhere with a link anywhere else. Where are the hair in the soup? OV
The title, which the steel producer Schmolz + Bickenbach recently placed, has a term until July 15, 2022. The volume rises to 150 million euros.
This clearly shows that you are investing in euros and therefore should not compare interest rates with bonds in Swiss francs. They also include a currency risk
But even for Eurobonds, the coupon of 5.625% is interesting. The bond is an increase of the obligation of 200 million euros already issued in April 2017.
The high coupon quickly explains: Schmolz + Bickenbach is rated by the l & 39; rating agency Moody's only with a B2 rating with a stable outlook, Standard & Poors rated B + with a negative outlook
The note shows that you need to take increased risks with the purchase of the obligation of Schmolz + Bickenbach and do not exclude a default, even if the steelmaker is making operational progress. In the first quarter of this year, sales increased significantly and the acquisition of parts of Asco Industries had a positive impact on sales. During the first three months of the year, sales increased by almost 20% to 828.9 million euros compared to the same quarter of the previous year.
The operating result is also significantly higher than the previous year and goes from 16.5 million to 59 million euro. In 2018, the management of Schmolz + Bickenbach expects continued growth in sales and profits.
In my opinion, the acquisition of parts of Asco Industries involves other risks. Steel demand is also subject to strong fluctuations – even excluding the international trade dispute between the United States, Europe and China.
This last factor represents an additional factor of uncertainty for Schmolz + Bickenbach. now low, especially since only about three per cent of sales are exported to the United States.
The negative effect could be further mitigated if higher rates could be passed on to customers, which is the opinion of management. is the involvement of Victor Vekselberg in the steel producer suffering from US sanctions. After all, the shareholders' agreement between Vekselberg Renova and Schmolz + Bickenbach Beteiligungs GmbH has been dissolved.
Given the many imponderables and credit ratings, the Schmolz + Bickenbach bond is only suitable for private investors who can and want to bear increased risks
Not only should you be guided by the coupon of 5.625%, but you should also be aware of the increased risks associated with the bond.
Those looking for maximum security should avoid the link, as Schmolz + Bickenbach continue to bid.
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