(Bloomberg) -- Corestate Capital Holding SA slashed its earnings and cut asset valuations after E&Y completed an audit of its accounts.

The German real estate financing firm said its adjusted Ebitda was 43.8 million euros ($47.7 million) in 2021, less than half what it reported in preliminary results at the beginning of March, according to a statement late on Wednesday. The company also said it was forced to cut the goodwill value of its managed fund unit, HFS, by 175 million euros to 345 million euros.

The publication of the results cap a troubled period for Corestate. Restructuring advisers are pitching for a mandate amid expectations the firm will struggle to repay its debt. Its bonds due April 2023 are trading in deep distressed territory at less than 60 cents on the euro, according to data compiled by Bloomberg. 

Adler’s Largest Holder Walcher Sells 20% Stake in Corestate

The German firm’s largest shareholders -- Aggregate Holdings’ Guenther Walcher and Azeri investor Natig Ganiyev -- sold out their stakes in December. 

Financing costs soared in recent months on concerns about HFS and exposure to Adler Group SA, a real estate investor targeted by short sellers that’s partially owned by Aggregate Holdings. Last week, Corestate also lost one of its biggest contracts to manage properties for Germany’s largest pension fund BVK - Bayerische Versorgungskammer.

Corestate postponed the publication of audited results at the end of March as E&Y ran an impairment test focused on HFS. Shares rose as much as 15.6% on Thursday, but they’re still 15% lower this year.

Restructuring Advisers

With 500 million euros of bonds maturing by the end of 2023, Corestate’s creditors are now seeking advice on a potential debt overhaul. They’re in talks with firms including DC Advisory, PJT Partners and Houlihan Lokey, according to people familiar with the matter.

In a private pitch book sent to some of Corestate’s bondholders, DC Advisory said there were concerns about the firm’s managed funds. Those included high customer concentration, high fees despite a stated 0% default rate and loans that sat on their books for longer than expected, the people said. 

One of the alternatives being pitched is an amend-and-extend of Corestate’s debt maturities with stronger security for creditors. Pacific Investment Management Co. is Corestate’s largest bondholders, with around 142 million euros of unsecured and convertible bonds, according to data compiled by Bloomberg. 

Representatives for Corestate and PJT Partners weren’t immediately available to comment. Officials at DC Advisory, Houlihan Lokey and Pimco declined to comment when contacted by Bloomberg News. 

 

 

(Updates with restructuring advisers details, share price from third paragraph)

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