French regulators imposed a €75 million fine on asset manager H2O and banned its founder Bruno Crastes from the industry for five years for investing in illiquid debt linked to controversial financier Lars Windhorst.
The Autorité des Marchés Financiers announced the fines on the same day that H2O Asset Management said it would begin repaying investors some €1.6bn trapped in the fund for more than two years, in response to the repayment of shares by Windhorst’s company, Tennor Holding.
The French asset manager said on Tuesday that Tennor last month made a “partial payment” on H2O bonds, which will reduce the amount of outstanding debt by 250 million euros.
H2O added that this would allow it to start the “first repayment phase” in the coming days, more than two years after the asset manager liquidated the illiquid assets linked to Windhorst, capturing the savings of thousands of small investors.
“With this new milestone, H2O reaffirms its commitment to the full disposal of its divested assets,” the company said.
The announcement shows that investors will only receive a portion of the €1.6bn frozen in a special sub-fund created by H2O to hold Windhorst-related assets in 2020, after the French financial watchdog asked them to suspend some flagship funds because of concerns about the value of these assets.
While the asset was worth €1.6 billion at the time of separation, in December 2021 H2O wrote down €1 billion.
On Tuesday, the AMF also said it would seek €15 million from Crastes, plus a €3 million penalty for investment chief Vincent Chailley, over what it previously described as a breach of “grave” rules related to investments linked to Windhorst.
Once a respected money manager overseeing €30bn of assets, H2O has jumped from crisis to crisis since the Financial Times reported the scale of investments linked to Windhorst in 2019.
Windhorst was famous in Germany as a teenage businessman in the mid-1990s, but suffered a bruising fall that culminated in a suspended prison sentence in 2010 for alleged “breach of trust”.
H2O is also being investigated by the UK’s Financial Conduct Authority and faces a lawsuit in France from a group of more than 3,000 clients, who last year obtained a court order to appoint an expert to examine H2O’s trades linked to Windhorst.
H2O said on Tuesday that all investors will be “treated equally in the execution of the payment”.
Windhorst first struck a deal to buy back Tennor’s illiquid bonds and shares in April 2020. In May 2021, Tennor restructured the debt in its subsidiary into a new €1.45bn bond, but missed the deadline for repayment at the start of 2022, after this company briefly declared bankruptcy in the Dutch court.
H2O’s announcement suggests it has received a smaller initial payment than the €550 million that Windhorst said it would repay within a few weeks in August.
H2O did not respond to requests for comment. Windhorst declined to comment.
After the announcement of the AMF’s decision, Gérard Maurin, president of the H2O investor association, said: “We will now go back to court to ask for the return of the blocked savings.”