Debt as Spare Tire

Uniwheels' brand ATS supplies rims to supercar maker Fahlke Larea. Source: ATS
Uniwheels' brand ATS supplies rims to supercar maker Fahlke Larea.
  • Why it matters

    Why it matters

    Corporate bonds introduced in 2010 were meant to make it easier for smaller German firms to tap the capital markets.

  • Facts


    • Uniwheels produces aluminum rims for premium carmakers.
    • The company is one of the few success stories for bonds for Germany’s small and mid-sized companies known as the Mittelstand.
    • Uniwheels paid back its debt early after weathering the tough times.
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The setting for Uniwheels’ headquarters could hardly be more spectacular: hilly vineyards reach right up to the company’s property in Bad Dürkheim in southwestern Germany.

“In the summertime here, I ask myself why people travel to Tuscany,” said Ralf Schmid, owner and head of the specialty car wheel rim maker.

In January, the vineyards are leafless and barren. But the company, which is one of Europe’s biggest producers of wheels, knows how to get through the lean times.

In fact, the maker of rim brands like ATS, Rial, Alutec and Anzio is one of the few success stories for Germany’s corporate debt market for small and mid-sized companies known as the Mittelstand.

When they were introduced in 2010, there were high hopes for the mini-bonds. They were supposed to make it easier for smaller German firms to tap the capital markets.

But then came the insolvencies of bicycle maker Mifa, the soup company Zamek and even the cruise ship MS Deutschland. The Mittelstand bonds, created by the Stuttgart Stock Exchange, are moribund after burning some €250 million ($280 million) in investor cash.

But the look back is more positive at Uniwheels.

Its excursion into the corporate debt market had other benefits for Uniwheels, which professionalized its results.

“The bonds helped us get through some very difficult times in 2011,” Mr. Schmid told Handelsblatt.

The firm bought rim maker ATS in 2008 for €50 million – particularly bad timing in hindsight, as car sales plummeted around the world during the recession in the following years.

The auto industry recovered more quickly than expected, but struggling banks caused horrendous liquidity problems for mid-sized German companies.

“The WestLB was completely paralyzed during the financial crisis and blocked our banking consortium,” said Mr. Schmid. The now wound down state development bank was responsible for loans worth €28 million.

So Uniwheels corporate debt totaling over €50 million helped plug the hole in early 2011. The firm was able to stem the 7.5 percent interest as the auto market rebounded strongly. A heavy debt load led to a poor credit rating of BB+ as the debt was issued, but Uniwheels used the liquidity to recover and has been profitable again since 2013.

113 WTB Uniwheels Group-01

At the end of last year, Mr. Schmid paid off the bonds at the earliest point possible with yields low.

Mr. Schmid admits the corporate debt was essentially a spare tire for Uniwheels.

“Normally a bond is supposed to run five to seven years for investors,” said Mr. Schmid, aware they weren’t pleased by his early payout.

Still, for the company, it was the right move: Uniwheels restructured its debt and cut its interest payments to boost its results. A bank consortium of three Polish banks, Austria’s Raiffeisen Bank and Germany’s Commerzbank extended a line of credit for €95 million.

“We didn’t use anywhere near all of it,” said Mr. Schmid.

Business is now good, if not spectacular. Sales rose 5 percent to €400 million from 7.2 million wheels. Some 80 percent of them were built in Polish factories. Mr. Schimd said the company’s equity ratio was 35 percent and the Ebita margin had been in double digits since 2013. In the first half of 2014, Uniwheels made a profit of about €8 million.

Its excursion into the corporate debt market had other benefits, according to chief financial officer Karsten Obenaus. “The bonds made us more professional,” he said.

For example, the company now presents its results according to international standards. That made the switch to a joint-stock company two months ago less onerous – even if a public listing isn’t imminent.

“To be able to do it, but not have to do it is a calming feeling,” said Mr. Schmid. “But I don’t rule it out.”

The firm’s aluminum rims are becoming more popular with premium customers such as Daimler, BMW, and Audi. Its most expensive rim, built for a Porsche model, weighs eight kilos and costs €1,500.

Uniwheels also supplies rims to racing sport and is number three in Europe behind Borbet and Ronal.

“The comparatively lighter aluminum wheels help achieve the CO2 reductions required by lawmakers,” said auto expert Stefan Bratzel.

Design considerations for product differentiation are also playing a bigger role in the industry. But major growth is unlikely, even if mid-range cars are now coming with aluminum wheels. Mr. Schmid reckons that eventually steel rims will be completely driving from the market. Though the firm is also experimenting with carbon materials, Mr. Schmid said the future still belonged to aluminum.

“We’re actually a relatively boring company,” he said. “We just want to quietly earn our money and not be dependent.”

Some bond investors surely would have rather put their money in a boring company like his than have sunk it into a bust cruise ship.


Martin-Werner Buchenau is Handelsblatt’s correspondent in Stuttgart. To contact the author: buchenau@handelsblatt.com

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