Rheinmetall Issues First Bond in 16 Years Amid Q1 Cash Burn and Rising Competition

Rheinmetall issues first bond since 2010 for €500M expansion amid negative cash flow, falling share price, and looming KNDS rival IPO.

Rheinmetall is turning to the public bond market for the first time since 2010, seeking €500 million in fresh debt to finance its breakneck expansion. The Düsseldorf-based defence group is sounding out investors for a five-year unsecured note, with a syndicate that includes Crédit Agricole, UniCredit and Deutsche Bank. Moody’s is expected to assign a Baa1 rating to the offering, a step that underscores the capital demands of the current arms boom even as the company struggles with a deteriorating share price.

The timing of the debt sale reflects a strained balance sheet in the short term. Rheinmetall’s first-quarter free cash flow swung to minus €285 million, dragged down by heavy stockpiling and higher capital expenditure. Revenues came in at €1.94 billion — well short of the €2.3 billion analysts had penciled in — though the operating margin of 11.6% met forecasts. The cash burn has spooked some on the Street. UBS slashed its price target from €2,200 to €1,600, while JPMorgan cut even more aggressively, from €2,130 to €1,500. Both banks kept buy ratings, but they argue that current valuations already discount any growth beyond 2026.

Adding to the pressure, the German government has agreed to take a 40% stake in KNDS, the Franco-German tank builder behind the Leopard 2 and the Panzerhaubitze 2000. France will hold an identical 40%. That paves the way for an initial public offering of the state-backed rival, expected in June or July 2026 at an implied valuation of €18 billion to €20 billion. Long-term plans call for both nations to reduce their holdings to 30% each, but for now a publicly listed competitor backed by Berlin and Paris is set to step directly into Rheinmetall’s core arena.

Rheinmetall is not sitting still. The group is reportedly eyeing a takeover of Iveco’s defence division (IDV), which is being carved out for sale separately from the parent company’s ongoing talks with India’s Tata Group. Other potential suitors include Leonardo, KNDS and CSG. A successful deal would bolster Rheinmetall’s product portfolio — but the backdrop remains challenging. The Bundesbank is projecting a stagnant German economy in the second quarter of 2026, weighed down by the Iran conflict and higher energy costs. Analysts still forecast a dividend of €15.17 per share for that year, providing a floor of sorts.

The company’s record order book of €73 billion provides long-term ballast. Management is sticking to its full-year guidance of up to €14.5 billion in revenue, betting that a full production ramp-up at the Murcia site in Spain and pending deliveries of trucks will lift second-quarter numbers. A convincing operational rebound would also smooth the path for the new bond placement.

For now, the stock is nursing steep losses. Rheinmetall shares trade around €1,210.60, down almost 40% from their 2024 high and more than 24% lower since the start of the year. Volatility remains elevated at roughly 51%. The next major test will come in the summer, when delivery figures from the ammunition and vehicle lines either back up management’s confidence or hand investors another reason to sell.