Lars Windhorst pledges to repay €550mn to H2O in ‘weeks’

Lars Windhorst has pledged to hand over more than €500mn to H2O Asset Management in a matter of weeks, which would clear a significant chunk of the controversial financier’s debts with the troubled investment firm.

Windhorst, a 45-year old German entrepreneur with a chequered business record, is late repaying more than €1bn to H2O, an erstwhile star of the European asset management industry that is being probed by multiple regulators over its entanglements with the financier.

Windhorst told the Financial Times that his investment firm Tennor will soon repay hundreds of millions of euros after an upswing in the fortunes of its eclectic portfolio of businesses, which range from a lossmaking lingerie maker to an African farming company.

“Our diverse set of businesses across sectors and geographies have performed strongly in the first half 2022 and, as a result of that, we managed to increase liquid assets to over €500mn across the various group entities,” he said. “As the reduction of debt remains a priority, we will make payments of not less than €550mn in cash to H2O Asset Management in the coming weeks.”

If the repayment clears on schedule, it would pave the way for H2O to provide a first distribution to those with money trapped in its funds, which range from retail investors in France to South Korean asset managers.

Once a well-respected money manager that oversaw €30bn of assets, H2O has lurched from crisis to crisis since the FT exposed the scale of its outsized bet on Windhorst in 2019. The following year, the investment firm was forced to temporarily halt redemptions on its core funds after the French markets regulator raised concerns about its links to the financier. Two years later, investors’ money is still stuck in the so-called “side pockets” H2O set up to house €1.6bn of these hard-to-sell assets.

In a letter to investors last month, H2O revealed that Tennor had missed a January deadline to repay over €1.1bn.

In lieu of any cash, H2O also disclosed that Windhorst handed over $106mn worth of convertible bonds linked to Gett, a taxi-app start-up that was due to list via a special purpose acquisition company. The planned listing fell apart shortly afterwards due to the company’s substantial exposure to Russia, meaning H2O’s investors have so far received nothing from the arrangement.

Despite the setbacks, H2O told investors that it was “committed to enabling” their first reimbursements this year. When asked by the FT why it thought this was the case, it said: “We have understood loud and clear that it is of the utmost importance to our investors to secure repayment on some of the assets held in the side pockets in 2022.”

“This is not a guarantee but a strong and active commitment from H2O,” the asset manager added.

It is not the first time Windhorst has publicly pledged swift repayment.

One year ago, he told the FT that he expected to “pay down a major part of the H2O debt” by the end of 2021. Instead, H2O ended up writing down the value of its Windhorst-linked investments after a Dutch court briefly deemed Tennor to be insolvent.

Earlier, at the height of the coronavirus pandemic, the financier struck a deal to buy back these hard-to-sell assets from H2O at a discount. But the agreement fell apart amid regulatory scrutiny, which led to Germany’s financial watchdog BaFin filing a criminal complaint. Windhorst later claimed that the matter had been settled.

H2O is under investigation from France’s market regulator and the UK’s Financial Conduct Authority. In recently filed 2021 accounts, the firm revealed that it last year booked a £890,000 provision in relation to one of its regulatory probes.

The firm’s auditor Mazars warned that there was “material uncertainty” surrounding the size of the charge, however, while H2O also disclosed that it has not yet booked a provision in relation to an FCA probe for “alleged non-compliance” with several of the regulator’s principles.

H2O told the FT that while it was “not in a position at this stage to predict the investigations’ consequences”, it expects to continue as a going concern “based on current cash balance and reserves, the business forecast and the capital resources adequacy forecast”.

The asset manager has this year reaped gains from swashbuckling bets on the direction of government bonds and currencies. While outsized exposure to the Russian rouble badly knocked its €1.7bn flagship fund when the country’s president Vladimir Putin ordered an invasion of Ukraine in February, the currency’s rebound has seen it come back to a more than 12 per cent return year to date.