(Bloomberg) –

Tennor Holding of German financier Lars Windhorst has reached an agreement with H2O Asset Management to restructure the debt held by the investment fund it was supposed to buy.

The transaction includes the issuance of 1.45 billion euros ($ 1.77 billion) of new notes due next year to repay debt related to companies owned by Tennor, owned by H2O and small holders of bonds, Windhorst said in a statement to business partners and clients seen by Bloomberg. Some details of the deal were also posted on Tennor’s website on Saturday.

Under the agreement, and under certain conditions, the interests in Avatera Medical NV and La Perla Fashion Holding of Windhorst which guaranteed the old debt will be transferred to Tennor. The new super senior guaranteed notes will bear 4.5% interest and will be guaranteed by Tennor group entities, the statement said.

An H2O official declined to comment on the deal. A representative for Tennor declined to provide further details.

The bond restructuring is the latest step in a two-year back-and-forth over illiquid bonds sold by Windhorst-related companies that has caused large cash outflows for H2O, which was once stable in asset management from Natixis SA.

Repurchase agreement

Last year, H2O agreed to resell the investments to Windhorst in stages, seeking to complete the transactions within the next month. The buyout has struggled to take off as the French regulator ordered H2O to freeze funds due to valuation uncertainties, while Tennor was unable to raise sufficient new funding and monetize the investments. It wasn’t until March of this year that he struck a deal to sell Tennor’s controlling stake in Fyber NV, a digital advertising company, in order to match funds.

Read more: Lars Windhorst Reaches $ 600 Million Deal Before H2O Repayment

In the summer of 2019, H2O suffered € 8 billion in cash outflows prompted by investor concerns over holdings of thinly traded Windhorst-linked notes.

After the repurchase agreement, Bloomberg News reported that Windhorst secured funding to repurchase part of the notes at a discount of around 50% via a new bond dubbed Evergreen Funding. The notes have since been withdrawn.

H2O investors have been trapped for some time as the French regulator stepped in and ordered the company to halt buyouts of some of its portfolios due to valuation uncertainties. H2O has reduced the value of these investments on several occasions. In January, the shareholder of the Natixis SA fund decided to sell its stake to management.

(Updates with comments in the fourth paragraph.)

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