22 June 2020 by lberuti
Despite a moderate and broadbased widening, the global environment felt globally supportive for risk given the current circumstances. Fears of a second COVID-19 second wave appear to have been largely put aside, and investors had the opportunity to focus on some idiosyncratic situations, which gave centre stage to Germany for all the wrong reasons. WDIGR ( Wirecard AG ) was again in freefall after the company confirmed that the €1.9Bln that appeared to be missing last week probably do not exist. It withdrew its latest set of financial results, paving the way for a credit event – the first to hit Europe this year after a string of defaults in the US high yield universe and among emerging sovereigns -. The bonds lost another few points and were wrapped around 25cts on the dollar. LHAGR ( Deutsche Lufthansa AG ) was also under the cosh after it emerged that no more than 38% of its shareholders have registered to vote (the deadline to do so was this week-end) at its General Assembly scheduled on Thursday. It means that the management will need 2/3 of the votes to validate any decision rather than a simple majority and it therefore effectively gives its biggest shareholder, billionaire Heinz-Hermann Thiele who owns 15% of the company, a blocking minority. While his intentions are not clear at this stage, he has been a vocal critic of the terms of the financial package provided by the German government which investors deem essential to the survival of the company. LHAGR’s 5-year risk premium eventually closed off the wides – it reached 450bps early in the session – but the resulting uncertainty pushed it 47.5bps wider. It was the worst performer among the constituents of iTraxx Main and explained almost 20% of the 2.5bps widening of the index fair value.