It was the most spectacular insolvency among the issuers of so-called “Mittelstand” bonds this year. In early July, German agricultural group KTH Agrar was forced to file for bankruptcy after failing to make an interest payment of €17.8 million ($19.8 million) due the previous month.
The scandal has widened since then: Investors are worried about the more than €340 million they had invested in two other bonds issued by the publicly-traded company. Its subsidiary KTG Energie, which also has a bond outstanding, was not directly affected by the insolvency. Yet its head Thomas Berger was forced to resign on Tuesday.
The KTG Agrar insolvency is just one case in a wider drama playing out in Germany’s debt market for small and medium-sized companies. The once-vaunted reputation of Germany’s “Mittelstand,” the name given to small businesses here, is taking a serious hit in the process.