(Bloomberg) -- Branicks AG is marketing a portfolio of retail assets as the German real estate company battles to raise cash, with a first deadline on debt negotiations just a month away.

Branicks is seeking about €170 million ($184 million) for the properties, according to people familiar with the matter, who asked not to be identified because they’re not authorized to speak publicly. The push to sell the assets coincides with talks to extend the terms on more than €400 million of its obligations for 2024.

The landlord’s debt troubles resemble the challenges that have ensnared even major German real estate companies like Vonovia SE, following a dramatic slowdown in deals and pressure on valuations that were brought about by rising interest rates. While many are resorting to asset sales for a liquidity boost, a weaker market with a steady supply of properties means securing high enough prices to pay down debt can be difficult.

Branicks, in particular, has been hit by the servicing costs of a loan that it took out for an acquisition and a loss in fees, contributing to a 90% slump in its shares since a 2020 high. 

“The liquidity situation is really getting critical,” said Clark McPherson, a portfolio manager for fixed income at Clearance Capital. “The market has woken up to this and it’s very obvious the company is not finding the renegotiation of the bridge facility that easy.”

A spokesperson for Branicks declined to comment on the asset sales, but said that the company’s strategic plan focuses on its portfolio of logistics and office properties.

“Branicks will continue to keep the capital markets and the general public informed about further progress,” they said.

The company is facing tight deadlines to do the refinancing while dealing with a series of moving parts.

Lenders of a bridge loan with €200 million outstanding, including HSBC Holdings Plc, have granted relief until March 27 for certain payment obligations. Branicks is working to refinance the facility, which was used for the purchase of VIB Vermoegen AG shares in 2022.

Tight Headroom

Branicks has limited room to manoeuvre when it comes to negotiating a fresh agreement, given the need to comply with covenants of a €400 million bond that’s due in 2026. Last month, S&P Global Ratings said that it doesn’t envisage a breach of the terms, though Branicks will have “very tight headroom” for the remainder of the year.

The notes closed at a record low last week, and are indicated at 29.7 cents on the euro, according to data compiled by Bloomberg.

Separately, the company is also in discussions to extend the maturities of €225 million of promissory notes. Such instruments can be more difficult to amend than publicly-traded notes, given that they need the consent of every lender. 

Read More: How Quirky German Debt Is Winning Followers Abroad: QuickTake

Among them, for Branicks, is the European unit of Russia’s sanctioned VTB Bank, according to people familiar with the discussions. The bank was renamed last year as OWH SE after its parent company refused to allow it to trade under the brand.

Bloomberg News has reached out to OWH for comment.

Asset Sales

Relying on further disposals may be challenging for Branicks. The company has already narrowly missed a 2023 target of at least €300 million of asset sales, achieving €285 million for the period. For properties with mortgages, paying back that debt will also eat into the amount of cash available for the company after a sale.

Such disposals have not been simple even for investment-grade issuers, with LEG Immobilien loosening its leverage targets and emphasizing a disciplined sales approach to avoid parting with assets too cheaply. Junk-rated firm Deutsche Mittelstand Real Estate, which is now also negotiating with creditors, came under pressure last year after delays in the widely-touted disposal of a logistics asset. 

“The transaction market is still very muted and all of the players – large or small – try to sneak through the same bottleneck,” said Markus Schmitt, a fixed income analyst at Oddo BHF Credit Research. “Many companies underperformed their self-imposed disposal goals in 2023 as they are not willing yet to commit to larger discounts.” 

©2024 Bloomberg L.P.