Bets against HelloFresh SE's (HLFFF) newly issued bond have surged just three weeks after the meal-kit and ready-to-eat food company entered the debt market. More than 10% of the 350 million ($400 million) bond is available to borrow, with nearly all of that amount currently on loan, according to EquiLend, a trading and analytics provider. EquiLend noted that this level is more than five times the average for European corporate bonds, suggesting unusually elevated demand from investors seeking to short the issue.
Borrowing costs for the HelloFresh bond have also climbed to 200 basis points, compared with an average financing rate of 50 basis points for comparable bonds. Nancy Allen, EquiLend's head of data and insights, said the figures indicate that the supply of bonds available to borrow has not kept pace with demand from short sellers. These investors typically borrow and sell bonds in anticipation of repurchasing them later at a lower price, while paying a fee for the securities during the loan period.
The rise in bearish positioning comes two months after S&P Global Ratings, a credit-rating agency, downgraded HelloFresh to junk status because of weakening volumes in its meal-kit and ready-to-eat segments. S&P also cited pressure on consumer incomes, intense competition and rapidly evolving technology as concerns. The bond was issued at par on July 1 but is now trading at around 95 cents on the euro, according to Bloomberg, suggesting investors may be pricing in greater risk around HelloFresh's operating performance and debt-market outlook.