Mutares' Covenant Countdown: A Deadline, a Downgrade, and a $105 Million Bet on the US

Mutares' June 29 covenant test hinges on Wärtsilä Gas Solutions acquisition. Warburg cuts target to €41, sees 44% upside. Capital raise funds US expansion.

Mutares is barrelling toward a pivotal moment on June 29, 2026, when a suspended bond covenant will be formally tested. The outcome hinges on whether a single completed deal – the acquisition of Wärtsilä Gas Solutions – is enough to restore the net debt-to-equity ratio before the waiver expires. Warburg Research, meanwhile, has trimmed its price target on the stock from €46 to €41, though it maintains a "Buy" rating, leaving roughly 44% upside from the current share price.

Why the Covenant Was Triggered

The covenant breach occurred at the end of 2025, when net debt relative to equity breached the thresholds set out in the bond terms. The culprit: valuation effects, fewer transactions than anticipated in the fourth quarter, and higher lease liabilities. Bondholders granted a waiver, pushing the verification date to June 29. Ten days before that deadline, the clock is now ticking loudly.

The Wärtsilä Gas Solutions acquisition closed in June 2026, so its balance-sheet effect will land within the test window. The planned purchase of SABIC, however, is expected to close only in the second half of the year – too late to help. Despite that, management remains confident it will not merely meet the covenant but "significantly undercut" the threshold.

Capital Infusion Fuels North American Ambitions

To strengthen the balance sheet, Mutares raised €105 million (gross) through a capital increase in April 2026. The bulk of that money is earmarked for a US expansion: the company is establishing a second location near Chicago, and its North American pipeline already boasts potential acquisitions worth nearly €5 billion in sales volume.

That cash injection also gives Mutares more firepower for the deal-making engine that underpins its turnaround model – buying underperforming corporate divisions, restructuring them, and later divesting them for a profit. Analysts at Warburg note that the speed at which this new capital can be deployed into value-accretive acquisitions will be a key variable in closing the gap left by the portfolio transformation.

Bond Buyback Programme Accelerates

Parallel to the covenant fight, Mutares is executing a tender offer for up to 10% of its €250 million variable-rate bond, priced at 101% of par. Starting in the second quarter of 2026, the company plans quarterly repurchases of at least €25 million. The target is to reduce total debt from €385 million at end-2025 to between €250 million and €300 million by the end of this year, funded largely by the proceeds from portfolio companies sales.

Operating Momentum Remains Solid

The underlying business continues to deliver. First-quarter group revenue rose 10% year-on-year to around €1.68 billion. Management forecasts full-year sales of between €7.9 billion and €9.1 billion, with a holding net profit of €165 million to €200 million.

Stock Recovering, But Well Below Highs

Shares trade at €28.35–€28.55, roughly 4.5% lower year-to-date. After hitting an April low of €23.30, the stock has rebounded more than 21% and now sits about 7% above its 50-day moving average of €26.63. The 52-week high of €36.75 remains 22% away. Warburg's cut to the price target reflects the capital measure's impact on valuation models and the partial offset from recent acquisitions, but analyst Stefan Augustin remains constructive. With the RSI at a neutral 57.9, the stock is stabilising without overheating.

The next two weeks will be telling: the covenant verdict on June 29, followed by the annual general meeting on July 3. If Mutares clears the hurdle without the SABIC deal, bondholder anxiety should ease markedly – and the equity story may gain a new chapter.