Investors Must Fear for Their Money
For investors of the registered bond ProReal Germany 7, there is bad news: Neither the interest payment due on June 30, 2024, nor the repayment of the bonds by December 31, 2024, is expected to occur on time. This was announced by the company in a mandatory notification on February 19, 2024.
The notification states that the issuer “will most likely be in default of payment to the investors from 07/01/2024 onwards.” In plain language, this means that investors will likely not receive the interest payment due on June 30, 2024, on time, nor the repayment of the issued registered bonds by the end of 2024. The exact timing and whether the payments will be made at all were not disclosed.
Risk Analysis of Construction Projects
This development does not come entirely unexpectedly. The Hamburg investment house One Group has announced a thorough risk analysis for construction projects in its portfolio due to the difficult situation on the real estate market and has suspended interest payments until the expected completion of the analysis in the first quarter of 2024. This affects the issues ProReal Germany 7, ProReal Germany 8 – exclusive follow-up offer, ProReal Europe 9, and ProReal Europe 10. Interest payments are to remain suspended until the completion of the risk analysis. This affects approximately 11,000 investors who have invested a total of around 400 million euros. The interest payments due on January 15, 2024, for the investment products ProReal Europe 9 and ProReal Europe 10 have already been suspended.
The initial results of the risk analysis have apparently brought nothing good for the investors of the registered bond ProReal Germany 7. Particularly bitter is the fact that an extension of the term until the end of 2023 had just been decided. The repayment of the bond to the investors was due by the end of 2024 at the latest. But now, investors can no longer count on this and must instead fear financial losses. As reported by Handelsblatt, around 4,000 investors are affected, who are said to have invested more than 105 million euros in the bond ProReal Germany 7.
Registered Bond with Qualified Subordination
For the registered bond ProReal Germany 7, as well as for the issues ProReal Germany 8 – exclusive follow-up offer, ProReal Europe 9, and ProReal Europe 10, a qualified subordination was agreed upon. The investors are now feeling the consequences of the agreed subordination. This is because the issuer can suspend the interest payments if the payments could lead to or even threaten the insolvency of the company, as advised by the law firm MTR Legal Lawyers.
Should ProReal Germany 7 GmbH have to file for insolvency due to the difficult situation in the real estate market, the situation for investors will worsen significantly. Their claims will be treated as subordinate due to the subordination agreement, and the claims of other creditors will be serviced first. In the insolvency proceedings, investors could thus end up with nothing.
However, there has been no talk of insolvency so far. Nonetheless, it is advisable for investors to check whether the subordination was effectively agreed upon. This is often not the case, meaning that the investors’ claims would then not be treated as subordinate.
Potential Compensation Claims for Investors
To fend off financial losses, investors can also check their claims for damages. Investors are entitled to proper investment advice. This includes being informed by investment advisors or brokers about the existing risks of the investment, particularly about their total loss risk. If the risks were concealed or trivialized, compensation claims may have arisen for the investors.
Investors of the issues ProReal Germany 8 – exclusive follow-up offer, ProReal Europe 9, and ProReal Europe 10 should also be particularly vigilant and monitor whether payments remain suspended. They too can review their legal options before financial losses materialize.
MTR Legal Lawyers is a law firm experienced in capital market law and is happy to assist affected investors.
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