Report
IHO / Schaeffler : Complexity has not reduced, but IHO’s relative value has
1/ Automotive and industrial headwinds (even before Liberation Day), to be addressed by Schaeffler and Conti via self-help measures. The current developments are very dynamic and there is a great degree of uncertainty over the next 12-18 months and if finally a recession will be seen or not.2/ Remaining rating risk and that the IHO PIK toggle notes become B+ at S&P.
3/ The IHO bonds lost attractiveness in the last months, following a recovery after the March 2025 sell-off. Schaeffler bonds were never really attractive from a relative value perspective.
4/ Successful realisation of synergies at Schaeffler, the Auto spin-off Aumovio and the monetisation of ContiTech at Conti (in the best case resulting in a material special dividend to IHO) – all would be beneficial for IHO.
5/ IHO and Schaeffler have smartly addressed debt maturities and liquidity before the March 2025 events and as such, the liquidity situation is sound at both issuers.
6/ We believe that IHO will address its expensive its 2028 PIK toggle notes in the next quarters (our gut feeling Q1 26). They would be able to reduce cash interest by more than 300bp on the instrument.
We affirm our Negative Credit Opinion for IHO and Schaeffler.
We adopt the following recommendations:
IHOVER 8.750 2028: Neutral (affirmed). We expect IHO to address the bond sooner or later.
IHOVER 6.750 2029: Neutral (vs. Buy). Small pickup only.
IHOVER 7.000 2031: Buy (affirmed). Limited pickup, but we affirm our Buy recommendation.
SHAEFF 2.750 2025: Reduce (vs. Neutral).
SHAEFF 4.500 2026: Reduce (vs. Neutral).
SHAEFF 2.875 2027: Reduce (vs. Neutral).
SHAEFF 3.375 2028: Reduce (vs. Neutral).
SHAEFF 4.250 2028: Reduce (new).
SHAEFF 4.750 2029: Reduce (vs. Neutral).
SHAEFF 4.500 2030: Reduce (vs. Neutral).
SHAEFF 5.375 2031: Reduce (new).
Underlying
Schaeffler AG
Provider
Oddo BHF
Oddo Securities provides securities brokerage and research services. The company offers equity, economic, and derivatives research and credit analysis services. It focuses on insurance, automotive, building materials, pharmaceuticals, telecommunications, information technology, and agri-food industries.
Markus Schmitt
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