Goldman Sachs continues to move its ‘usufruct’ stake in Audax. The investment bank has cut its indirect stake in the energy company from 8.9% to 4.7% in the last month, according to its statements to the CNMV registry, after getting rid of a series of convertible bonds and reducing the loan securities ‘hedge funds’ than with bank clients. Previously, from October to the end of January, it had raised that percentage from 3.5% to 8.9%. What is behind these accordion-shaped movements in the shareholder structure of the energy company?
Beyond the confusion that it can cause among investors, the Goldman Sachs dance around Audax is closely related to the participation of the main shareholder, José Elías Navarro, and the high presence of short hedge funds on the company (Polar , Citadel, Linden, DE Shaw control 5.7% of the group) in a financial triangle that shakes the price periodically, although it appears out of context for the small investor both in the media and on the CNMV website.
The cement of this three-way relationship is the issuance of a series of convertible bonds for shares in November 2020 for a value of 125 million euros and executable in 2025. In that operation, Goldman acted together with the French BNP Paribas as underwriter of that hybrid debt among 50 institutional clients. To carry out this operation and others (such as the issuance shortly after, in December 2020, of another 200 million euros in senior debt), the US entity requested guarantees.
At that time, Elías constituted a securities loan with Goldman and BNP on 10.9% of Audax divided into three tranches: 4.5% (20 million titles) maturing in February 2026, another 4.5% with the same time period and also categorized as “right to recover shares given in loan”. Lastly, the first shareholder entered into a purchase and sale contract for 1.8% of the capital that he recovered in 2022.
In addition to obtaining additional returns for the ‘rental’ of his shares, Elías Navarro reserved the right to recover those packages of shares that form part of the 75% of the capital of Audax under his ownership in the future. In addition, in this way he protects himself against the downward pressure that the issuance of convertible debt usually causes on the shares of a company. It is the main reason why there are four large international ‘hedge funds’ in Audax with 5.7% of the capital in a short position despite the fact that it is a mid-cap value (600 million).
In 2025, when the conversion is carried out, a relevant part of the energy capital will pass into the hands of the bondholders through an increase that will dilute the old partners. To finish protecting himself in the future, Elías has been one of the first to register an application to obtain ‘Loyalty Shares’, titles with a supervote. The change was approved at the June 2022 Board, it was modified in the bylaws two months later and it will become a reality in January 2025, when it will be two years since the official registration.
The recommendation of convertibles by Goldman and the bears
At the end of January, Goldman declared to the CNMV that he had massively repurchased convertible bonds until he accumulated an indirect position in Audax of 3.96% of the capital, which added to the 4.5% of the usufruct of the shares of Elías under his control. , they indirectly shot up their participation in energy to close to 9% of the capital, according to their statement to the supervisor. The price of convertible bonds – which yield a coupon of 2.75% per year until 2025 – had plummeted to half its value, with a 50% discount on the nominal.
This continued downward movement in the price of the bond in 2022 -and with the profitability in the investor sense- is mainly due to the fact that the cycle of rising interest rates is causing investors to demand more for their money and get out of the low-yield corporate debt. For comparison, Treasury Bills now yield 3%, although at the time of the issuance of the convertibles in 2020, rates were at 0% and the Bills were ‘negative’ yielding. Following Goldman’s repurchases, the price of the bonds has risen to 75 percent of nominal.