A Top Mizuho Bond Trader Has Made Some Fascinating Friends

A Towering Mizhuo Bond Trader Has Some Interesting Friends

Like most financiers, Claus Jorgensen knows the value of relationship building. The Danish-born bond trader enjoys entertaining clients at 67 Pall Mall, an oak-paneled drinking club close to Buckingham Palace that he cofounded with other wine-devoted bankers.

Yet there’s one business contact and fellow oenophile who may matter more than most to Jorgensen: Lars Windhorst, the controversial financier, former bankrupt and one-time wunderkind of German industry.

Jorgensen, Mizuho International Plc’s top European credit trader, has been in the spotlight recently because of his board role at German property firm Adler Real Estate AG, now part of the embattled Adler Group SA. He and his Mizuho team pitched bonds linked to the company without disclosing his directorship. His lawyers say disclosures weren’t needed as there were no restrictions on the bonds when the pitches were made.

It isn’t the first time that Jorgensen — a physically imposing, six-and-a-half-foot tall veteran of London’s junk bond scene — has been around controversy. Back in 2015 he was fired from HSBC Holdings Plc for undisclosed reasons. He lodged an unfair dismissal claim against the bank, where he’d worked since 2008. It was settled privately.

His Windhorst relationship was one of the things that caused consternation among HSBC colleagues, according to several former bankers there who’d only speak to Bloomberg anonymously.

Jorgensen met the German investor about a decade ago, and while at HSBC he traded bonds in Air Berlin Plc, a perennial corporate basket case once backed by Windhorst and whose 2014 debt sale was handled by his brokerage firm, people familiar say. The Dane also dealt bonds in housing developer Grand City Properties SA, in which Windhorst had a stake and held bonds.

HSBC Concerns

Some HSBC staff worried about the unusual way in which deals involving companies close to Windhorst were conducted, which included buying directly from the arranger.

One member of HSBC’s syndicated bond team at the time says the trades sometimes involved businesses that the lender’s primary desk avoided. The bank also became concerned about the size of its exposure to Windhorst-connected entities, a person familiar with the deals says.

Some former colleagues claim the Windhorst ties contributed to Jorgensen’s dismissal, although his lawyers say it was unrelated. The lawyers say he’s traded most European high-yield issues during his working life, and that there’s been nothing out of the ordinary in how he does it. An HSBC report on his sacking was filed with the U.K.’s Financial Conduct Authority, the lawyers add, which found no reason for further investigation or disciplinary action. HSBC declined to comment for this piece.

New Acquaintances

Jorgensen first entered Windhorst’s orbit after meeting him at a wine-tasting event about 10 years ago, a person who was there recalls. The German was impressed by the Dane, who’d earned a reputation as an astute but aggressive trader at UBS Group AG earlier in his career. Windhorst, famed for his lavish Gatsbyesque soirees, introduced Jorgensen to friends and associates over the next two years.

One of those people was Israeli property billionaire Yakir Gabay, then the controlling shareholder of Grand City. Other contacts that the German and Jorgensen had in common included Quirin Bank, one of Air Berlin’s main arranging lenders. Windhorst’s brokerage arm Anoa Capital handled the airline’s ill-fated debt sales in 2014 (Air Berlin went bust in 2017).

It was after meeting Windhorst that Jorgensen began trading Air Berlin and Grand City bonds, and in some instances he bought straight from the underwriters. That was seen as unusual given the lack of liquidity in the debt, and banks’ role as intermediaries. Bonds are usually allocated to investors, and bank traders join in on the secondary market.

Even though it’s a junk bond trader’s job to pursue risky business, other HSBC employees were uncomfortable about Windhorst, according to people familiar. The bank didn’t have a lending relationship with either Air Berlin or Grand City at the time. Grand City has since been upgraded to an investment-grade credit rating.

Jorgensen’s lawyers say that during his career he’s traded bonds “both when the bank of his employment was involved in arranging the transaction and when they were not. This is in line with any other trading desk in the world.” They say, “It is common market practice for market makers to buy from arranging banks as part of the syndication process.” 

Windhorst is well-known in debt markets because he uses lots of borrowed money to try to turn around ailing companies. He’s a divisive figure, though, not least because of his occasional involvement in so-called “repo” bond arrangements, according to people who’ve dealt with him. This is where you sell debt and buy it back at a higher prearranged price, creating a flattering picture of demand.

Deals with Windhorst have caused problems for financial firms before. In recent weeks a Dutch court appointed an insolvency administrator for Tennor Holding BV (the Windhorst investment firm known previously as Sapinda) in response to a creditor filing, and Windhorst settled a probe by German regulator Bafin into his financing arrangements with H2O Asset Management. Investors withdrew billions of euros from H2O back in 2019 when the scale of its Windhorst-linked investments was revealed.

Next Chapter

At HSBC the Windhorst connection didn’t last long. In May 2015 the bank suspended Jorgensen, and fired him a few months later. Around the same time, HSBC declined to work on a separate Windhorst-linked deal — one that didn’t involve Jorgensen — to raise $1.2 billion for a group of struggling airlines in which Dubai’s Etihad Airways held stakes.

It was a prudent choice. Goldman Sachs Group Inc. helped arrange the Etihad financing instead. Two years later, that deal went bust.

Windhorst tends to stick by his friends and allies, and the Jorgensen relationship outlasted his HSBC exit.

At the end of 2016 the Dane took a senior role at a London-based hedge fund called Fairwater Capital, founded a few years earlier by Australian credit trader Orlando Gemes. Its offices on Savile Row — home turf for England’s finest tailors — were one floor below Windhorst’s British HQ.

Fairwater and Windhorst shared more than an office block, according to 2015 Maltese corporate records obtained from the International Consortium of Investigative Journalists. They show Sapinda was briefly a shareholder in the fund, although Windhorst denies this. A person close to him says Jorgensen’s arrival at Fairwater was a coincidence, and not a result of their ties.

It was at Fairwater that Jorgensen became involved with Adler. In 2018 the hedge fund bought a 13.5% stake in Adler Real Estate, one of Germany’s biggest landlords, and in May that year Jorgensen joined the Adler board.

Working at Fairwater also brought him into contact with Aggregate Holdings SA, owned by Austrian financier Guenther Walcher and advised by a secretive Austrian tycoon: Cevdet Caner. Aggregate was the largest shareholder in a Fairwater fund invested in Adler; Caner, via family holdings, had been a backer of Adler for years. Caner moves in the same business circles as Windhorst.

Colleagues Reunited

Windhorst isn’t the only lasting relationship in Jorgensen’s career. At HSBC he worked with Asif Godall, head of traded credit in the Dane’s final year there. Godall left HSBC in May 2015 and ended up running Mizuho’s global markets unit. Jorgensen joined Mizuho in June 2019, reporting to Godall.

Mizuho says it signed off on Jorgensen’s board position at Adler Real Estate when he joined, and restricted him from trading its debt. But that didn’t stop him pitching bonds in Consus Real Estate AG (then backed by Aggregate) to a hedge fund client in late 2019, according to a person with knowledge of the conversation. This came ahead of the announcement of a three-way deal that led to the eventual merger of Adler, Consus and another property firm ADO. Jorgensen didn’t disclose his Adler job, the person says.

Then in May 2020 Mizuho’s credit team recommended Consus and Aggregate debt without mentioning Jorgensen’s Adler role.

The bank’s lawyers say there was nothing untoward in these pitches because the relevant information was public and Adler had no controlling interest in Consus or Aggregate. Jorgensen remains at Mizuho. 

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