(Debtwire) Mobico hybrid note coupon step-up approaches as SUNs face value outflow risk
10 Oct 2025 | 15:07 BST
sPerpetual notes indicated in high 40s
Solutions proposed include PIK conversion or cash offers to noteholders
Buysiders wary of investing in perpetual notes
Mobico’s perpetual note call period is coming up in November, but addressing the instruments may be considered by senior unsecured note holders as value leakage, according to an independent special situations desk webinar and two buysiders.
The UK-based transport group’s cap structure includes B2/BB+ rated GBP 250m 3.625% senior unsecured 2028 notes indicated today (10 October) at 85.75-mid with a 9.1% yield on IHS Markit. The company’s B2/BB+ rated EUR 500m 4.875% senior unsecured 2031s are indicated at 75-mid with an 10.8% yield. Mobico’s Caa1/BB-rated GBP 500m 4.25% subordinated unsecured perpetual notes are indicated at 48-mid.
The company’s perpetual notes rallied 1.5 points yesterday after it was announced that its subsidiary won an eight-year capital-light contract in the Kingdom of Saudi Arabia. The contract had a total value of EUR 500m in revenues.
The hybrid call period is from November 2025 to February 2026, when the company has options to call and refinance or roll the note, which resets interest to around 8.5% in February from 4.25% currently. This means around a GBP 21.2m annual impact at current rates, according to the 1H25 investor presentation.
Management stated on the 1H25 earnings call that the notes are expected to be “rolled.”
“There are no plans to repay the hybrid in the near-term,” one source familiar said.
Independent special situations desk Sarria held a webinar on Tuesday (7 October) assessing legal risks and opportunities for the perpetual notes. The webinar included panellists Stephen Phillips from FreiLibertas, as well as Tom Astle and Alex Kay from Hogan Lovells.
The call period is a unilateral right to call at par, but it is difficult to see why the company would do a par call while a debt coupon step-up erodes away shareholder value. Redeeming the perpetual notes needs 75% consent and no scheme is needed, so Mobico could seek consent and propose a near-par deal for the perps, the webinar noted.
The company is free to tender for the perpetual notes but could do nothing to address them in the near term given its good liquidity, according to the webinar. But the stepped-up perpetual notes could be taking value away from equity in a future restructuring with the 2028 SUN maturity being a potential trigger.
The perpetual notes are subordinated instruments and one solution to address the notes could involve changing interest to a PIK component and then the 2028 and 2031 SUNs are refinanced with money kept in the business, the webinar stated.
A solution to address the perpetual notes could involve an offer of cash to the perpetual noteholders who are taken out at less than par, according to the webinar. There is a 3.5x gearing covenant on the RCF which limits the amount of what cash offer can be made, while raising new borrowings to pay cash on the perpetual notes could reduce covenant headroom. Alternatively, there could be a component in any offer where one rolls into a new perpetual note and this would not impact the leverage ratio headroom. Any offer to perpetual noteholders could therefore involve some write-off or a deal where the perpetual notes are given some cash-pay coupon element and a roll into a smaller instrument with a lower write-off.
One dynamic in the question of the perpetual notes involves the GBP 500m perpetual notes trading around 48 pence on the pound meaning that if one buys a GBP 60m stake it could be a blocking position where one can demand for a call at or near par now or owners risk losing the company, the webinar noted. Holding 25.1% of the perpetual notes would give a blocking stake over the process. A tender or exchange offer for the perpetual notes would require 75% consent.
Sarria and Hogen Lovells held a second Mobico webinar yesterday.
Perpetual motion
The company faces upcoming debt maturities (see chart below).
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Source: Mobico 1H25 investor presentation
Buysiders polled were cautious on investing in the perpetual notes despite the low cash prices following the sell-off in recent weeks.
“The risks are with Spain, the Deloitte auditor resignation and the uptiering. The real worry is contract risks in 2026 and 2027, while the Sustainability Law means vehicles need to be ESG compliant,” one buysider said. “There is a risk of uptiering if the perpetual notes do a trade and get hard money and security in return for a giant haircut. The company needs to do something as the coupon climbs above 8% in February. The North America business sale won’t pay off the perpetual notes.”
A second buysider noted that if there are any advisory appointments, there could be something aggressive, and it could be a re-run of a similar situation to UK flooring maker Victoria with an uptiering even if there is no immediate trigger given the liquidity. The disposal means the company is left with a decent liquidity position, and it will be a wait before there is any capital structure catalyst, the second buysider added.
Mobico denied it hired Houlihan Lokey as its financial advisor, according to a 26 September Debtwire report. The company has a long-standing relationship with Rothschild as its debt advisor.
Mobico’s debt prices marked a significant drop as the market reacted to news that Deloitte had resigned as its auditor following the release of 1H25 results on 9 September.
An around GBP 31m piece of Mobico’s Sonia+ 85bps RCF was on sale via Morgan Stanley, according to a 16 September Debtwire report. The RCF piece was the remaining part of a GBP 57m block that was auctioned at 86.25 in mid-August. Mizuho was the seller of that block.
Mobico’s operations have recently come in focus after Fitch and Moody’s ratings actions in June, debates over a potential cessation-of-business event and RCF debt being put up for sale.
Mobico’s management guided towards possible disposals and deleveraging sequentially on its 1H25 earnings call held on 9 September. The company reported 1H25 results with continuing operations adjusted EBITDA falling 6.3% year-on-year to GBP 131.8m.
The Mobico 1H25 capital structure is broken down below (see Debtwire analyst calculations).
Mobico declined to comment.
by Adam Samoon and Priyanka Kotadia