Muddy Waters took a short position in the bonds of Luxembourg-based Vivion on Dec. 14. The price on Vivion's 3% bond maturing in 2024 fell past a two-year-low on the announcement.
Vivion raises money from outside creditors to fund property transactions. The real estate it owns include two property portfolios that contain 20 UK hotels and 33 German commercial properties. Muddy Waters, in a report last week, said it believed these portfolios were over-valued and not based on actual occupancy rates.
Vivion called that assessment "flawed." In a 32-page response emailed to Reuters on Thursday, it said its German and UK property portfolios were adequately valued by third-party firms. The method the Muddy Waters report used to quantify the vacancy rate was based on real estate listings. Vivion said that, according to industry practice, it often uses multiple listings for one space and advertises occupied spaces likely to become vacant.
Muddy Waters also identified what it said were accounting discrepancies, saying that loan amounts listed in Vivion's holding company and subsidiary filings did not always match those listed in the filings of the main company. In its response, Vivion detailed how the company was created and where the loans that underpin it came from, saying that when the company formed in 2018, it was capitalised by a group of shareholders that contributed real estate and cash in exchange for loans. One of these loans, worth 304 million euros, went to what Vivion said was a family office entity that it said Muddy Waters left out of its assessment.
It did not name it. Israeli investor Amir Dyan, who said he was Vivion's majority shareholder, said the loan went to a sister company, without elaborating. A second loan went to a subsidiary company called Matanya, which Muddy Waters did include in its report, Vivion said.
(Reporting by Nell Mackenzie; Editing by Amanda Cooper and Rosalba O'Brien) By Nell Mackenzie