German Wunderkind Turns to Plan B After Abu Dhabi Fund WalksBy
Windhorst says he has 200 million euros lined up for Sapinda
Abu Dhabi Capital ends six months of talks on support
Lars Windhorst made and lost a fortune before his 30th birthday. By the time he was 32, one of his companies faced another insolvency. The one-time German wunderkind has been fighting to avoid a third strike.
Abu Dhabi Capital ended more than six months of talks to provide a 1 billion-euro ($1.1 billion) bond guarantee and an equity injection for Windhorst’s main vehicle, Sapinda Invest, according to a statement to Bloomberg from the private investment fund, which is majority-owned by Sheikh Sultan Bin Khalifa Al Nahyan, the eldest son of the U.A.E.’s president. Within hours of that announcement, Windhorst said he separately arranged a 200 million-euro financing package from existing stakeholders.
For the 40-year-old Windhorst, the crunch represents a bump in the road to becoming an investing giant -- he cites Blackstone and KKR as his models. His detractors see broken promises. The story of Windhorst’s latest struggles resulted from reviews of documents filed in court, Sapinda’s internal documents and interviews with at least a dozen people familiar with his businesses.
“Despite some short-term challenges, I have confidence in the long-term success of the business and look forward to building more opportunities in 2017,” Windhorst said in a Nov. 29 statement to Bloomberg.
The challenges are financial and legal: Two of his early investors, billionaire Len Blavatnik and Italian entrepreneur Silvio Scaglia, sued him in London in separate lawsuits this year seeking as much as 86 million euros in total. Outside court, his companies have had cash issues. His main vehicle, Sapinda Invest, was six weeks late paying interest on its 1 billion euros of notes due in June, while Sequa Petroleum NV, one of his holdings, told bondholders in November that interest would be delayed because it hadn’t received enough funds from Sapinda Invest and another Sapinda-related company.
Windhorst assesses the situation from a sixth-floor Savile Row suite, where one wall of the office dining room is lined with fine wines on climate-controlled shelves. Speaking before the Abu Dhabi Capital financing fell through, he said he just needed time to fix the problems at some of the businesses in which he’s invested. His group sustains at least eight companies, with interests as diverse as film distribution in Europe and farming in Uganda, Zambia and Zimbabwe.
Until the summer, home was London’s One Hyde Park, an enclave where neighbors include oil billionaires. He has thrown his Christmas parties in the majestic hall of the Natural History Museum under a cast of a Diplodocus skeleton that arrived in London in 1905.
Not too shabby for the son of a stationer who started trading computer parts in his father’s garage at the age of 14 in Rahden, Germany, a town three hours south of Hamburg. Three years later, he was running a business with almost a hundred employees and had halted his formal education.
He became a symbol of entrepreneurship when Chancellor Helmut Kohl took him along on an official trip to Asia in 1995. The prodigy phase of his career ended when the dot-com bubble burst. By the age of 27 he’d filed for personal bankruptcy.
“I worked like crazy, calling or visiting former business partners to find out if they still wanted to work with me,” Windhorst said in a interview with the Suddeutsche Zeitung in 2010, recalling the years after the filing. He cited the backing of Robert Hersov, the heir of South Africa’s AngloVaal mining empire, as instrumental to his recovery.
The hurdles he faced were not just professional. On Christmas day 2007, the private jet in which he was flying between Hanover and Hong Kong hit a wall while taking off after a stopover in Almaty, in southeastern Kazakhstan. Bruised and with a damaged ear, he awoke to discover one of the pilots was dead.
“Lars Windhorst may have lost his magic touch forever,” the German newspaper Die Welt wrote at the time.
He reorganized his businesses around Sapinda and emerged anew. As real-estate prices recovered from the crisis, his investments in the developer Grand City Properties SA gained. Windhorst sold his last shares in the company this year, according to Sapinda Invest documents seen by Bloomberg.
After moving to the U.K. he befriended Peter Mandelson, a former Labour minister and European commissioner, who joined Sapinda’s advisory board. Now a member of the House of Lords, Mandelson left the board in September, according to the register of Lords’ interests on the U.K. government website. Mandelson confirmed via e-mail that he’s no longer a board member.
Windhorst won investments from billionaires including Blavatnik as well as Eyal Ofer, Israel’s richest man, and Roland Berger, the founder of the eponymous advisory firm, according to people familiar with the matter. Institutional money managers including BlueBay, Fidelity and Assicurazioni Generali SpA invested in his new ventures or bought bonds used to finance Sapinda’s expansion and its companies, according to data compiled by Bloomberg.
Lawsuits aside, those who have stuck with him seem more bemused than bitter. When asked by Bloomberg a few months ago, a Sapinda Invest bondholder was phlegmatic about the late interest payment.
He may pay late, but he always pays, said the investor, who asked not to be identified discussing a private matter.
As Windhorst did after his bankruptcy in 2003. He reimbursed his earliest investors even though there was no obligation to do so, according to people familiar with the matter.
Looking back at his first ventures, he told the Suddeutsche Zeitung he rued his failure to delegate. “We had no stable structures,” he said. “I made all the decisions, everyone was looking up to me.”
That management style may have persisted.
Wahid Chammas, a managing director at Janus Capital Group Inc. hired by Windhorst as chief investment officer in February 2016, left in March because of a divergence on how to improve the management and the funding of his companies, according to a separate person familiar with the matter. Chammas declined to comment on his departure, which he discussed on his LinkedIn page.
That served as a prelude to this year’s troubles. After selling a 10 percent stake in Sapinda in 2015, Scaglia’s fund, Pacific Capital, sued Windhorst in March claiming he reneged on the promise to buy back 26 million euros in bonds. A London judge issued a default judgment in favor of Pacific Capital on Sept. 6.
Blavatnik’s AI International Holdings, a unit of his Access Industries, filed suit against Windhorst in July. The claim was that he failed to make good on a promise to buy back 60 million euros of Sapinda’s bonds that AI had bought in February to provide short-term financing, according to court documents. Windhorst said that Abu Dhabi Capital would support Sapinda Invest and would buy bonds in the company, allowing him to meet his obligations, according to e-mails submitted to the court.
“If within 48 hours Abu Dhabi Capital has not booked the trade through a reputable broker or bank with Merrill Lynch we consider it failed and draw a line in the sand,” Windhorst promised in an e-mail to Lincoln Benet, CEO of Access Industries, on June 15. “I take responsibility.”
The transfer to Blavatnik was never made, and he took the matter to court. On Oct. 28, Windhorst admitted liability to a judge. A hearing will be held in 2017 to assess damages.
Declines in oil and commodity prices have contributed to the squeeze. In the past 12 months, more than 1 billion euros has been wiped off the value of the listed companies that Sapinda is invested in. The market value of Sapinda Invest bonds and those of other companies in the group have also dropped, according to data compiled by Bloomberg.
Shares in RNTS Media NV dropped as much as 9 percent to a record low of 1.6 euros as of 5:30 p.m. in Germany, while Sequa Petroleum fell 10 percent to a record 9 cents and Ichor Coal NV lost as much as 85 percent of its value to 7 cents.
The deal with Abu Dhabi Capital would have guaranteed Sapinda Invest’s debt and injected equity to acquire ownership of half the vehicle. Abu Dhabi Capital also had an option to buy 10 percent of Sapinda Holding, majority-owned by Windhorst, which expires at the end of the year. That won’t be exercised, it said in its Nov. 29 statement.
“Abu Dhabi Capital does not currently own any shares in Sapinda Invest or Sapinda Holding,” it said in the statement. “In the past year, Abu Dhabi Capital has purchased bonds issued by Sapinda and some of its companies. All these bonds have been sold and currently Abu Dhabi Capital does not own any.”
The new 200 million-euro financing will be provided by existing stakeholders in equity and loans to Sapinda Holding “to support the successful development of the various group portfolio companies,” Windhorst said in his statement.
— With assistance by Joe Mayes, Dinesh Nair, Martijn Van Der Starre, Stefan Nicola, Neil Denslow, Tony Aarons, and Riad Hamade