We assess how Ardagh Group (ARGID) SSN and SUN holders are likely to fare in the coming restructuring; look at the fair value of the various instruments and how this should influence our positioning in the group. We also build in the expected impact on AMP and revisit our positioning there. Finally, we look at the catalyst for the restructuring and when this will happen.
With the bonds trading in the 50s after the Q3 results, we have initiated coverage on this high-yield name. Our analysis is split between the operational issues and the legal structure of the Company and its bonds. We examine the opposing prospects for its wholesale and direct-to-customers, highlighting the differences and opportunities both channels offer. However, significant portion of our analysis is on the bond documentation, highlighting the potential pitfalls that leave bondholders vulnerable. With no bond maturities in the near term, we have modelled our projections for the coming quarters alerting to important adjustments investors should make to generate a more representative EBITDA calculation.
We will be holding an Isabel Marant Live Discussion on Tuesday, 4th February at 2 PM UK | 9 AM EST.
For more information, please contact info@sarria.co.uk.
After the recent new bond issue, we assess the position that holders of the New SUNs within the debt stack. We have decided to move Elior to the shelf, but we also have identified the factors that could bring the name back into the distressed universe.
Tullow's trading statement confirmed our published view released prior that the 2025 bonds will be repaid with cash on the balance sheet leaving the 2026 outstanding bonds exposed to the operational performance of the Jubilee field. We sound like a broken record, repeating our mantra that production is the main issue facing Tullow. We highlight the issues at Jubilee, including the J69 injector well, and before the statement, we had modelled further drilling in FY25. With the Senior Secured Bonds falling due in May 2026, the Company have acknowledged the requirement to refinance and simplify the Group's remaining capital structure during the remainder of 2025. We discuss the potential for asset sales and other options available to the Company.
Never mind the sponsor's position. What a recapitalised Klöckner Pentaplast might look like vastly depends on how well management can sell one factor. Taking that into account, we have re -modelled the underlying business and, based on that, various recap scenarios. Having done well in the name last year, we are positioning ourselves again.
The French Real Estate Service Roll-up's cash flow forecasts deserve some extra work as it heads into the crucial H125. Considering what drives the significant working capital seasonality, we think a mechanical forecast won't provide an accurate prediction. We changed our minds about this name last summer and remain of that same conviction, which will probably make us take another - very different position in the near future.
We've had PE on the shelf since 2021 - for sheer lack of fantasy. Not that we don't like the business, it's more to do with the economy. However, now that it's time to re-think the capital structure again, we have re-initiated on this old favourite and have started with a proposed recap table as well as projections based on the current reality in the UK. We like the pizza, we like the management, and we like this new cap structure. To find out if we like the bonds, please head to our website.
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The focus has shifted away from liquidity risk, and therefore, we have returned to some of our previous concerns with Grand City Properties. These centre mainly on regulatory issues for upgrading or modernising the residential portfolio. This will ultimately be driven by government decisions and we have outlined how Grand City Properties are capable of dealing with it.
Separately, we remain cognisant on the potential for Around lown to further increase its stake in Grand City Properties, and the impact this would have on GCP's credit and equity values.
Although we remain conscious of liquidity issues, the risk has dissipated following several exchange offers and improving underlying rate movement. Our main focus is now on regulatory issues, especially concerning modernisation efforts across the portfolio.
We remain vigilant on the CAPEX requirement to upgrade the portfolio, especially concerning its office portfolio. Separately, we are alert to the potential for further increases of Around Town's stake in Grand City Properties and the impact this would have across the two structures.
We look at who is benefitting from the latest liability management exercise at SBB Norden, to assess whether we should be updating our investment stance. We examine the potential size of exchange issuance, what the impact on the maturity profile would be and how it should be priced.
Usually in the shadow of its higher value-added rival Stonegate, Punch has benefitted from the lower elasticity of demand on beer vs. food in the UK. As the bonds look set for refinancing, we are reminding ourselves of the state of the UK consumer and how we see the pub chain's next years very differently from the last and are therefore staying on top of the situation for now.
Our analysis is focused on the causes of the company's continued underperformance and the levers available to management to keep EBITDA and free cash flow growing in a tough macro-environment.
We have also looked at the range of options now available to the company given the urgency in reaching a refinancing solution and whether that is reflected in the current trading levels of the debt stack. Based on these findings and our views of the latest financial results from the company, we have discussed this in our internal investment committee and taken a view on our position.
Adler Pelzer is one of the clearer names in the market. We have sharpened our analysis following the Q3 reporting, which supports our significant position in the name. We have brought the investment memo in line with the common Automotive view on the desk and have modelled a base case reflecting that.
We have given our analysis a major update in the context of our wider Automotive coverage, bottom-up and top-down. The company has been suffering from low profitability since its acquisition of Magna Interiors, but management have been pursuing a plan to address the situation. Our analysis and modelling therefore focuses on cashflows, asset sales, liquidity scenarios. Management has certain levers available, but we also explore what a balance sheet should hypothetically look like and what that would mean for all stakeholders.
After recently initiating on HSE 24, we assess how well the latest quarterly results matched our modelling and whether we should be revisiting our investment stance. We delve into the KPIs to see if there are any new trends for us to consider in valuing HSE24.
We have assessed the 24Q3 results and our full-year expectations to update our investment stance. We further evaluate the various complexities of the operating units to better understand how supply contracts can impact profitability. Finally, we consider how non-operational factors could impact the balance sheet of the company over the next 12 months.
We have focused our attention on two specific issues: capital expenditure and the potential impact on creditors of options available to Apollo as sponsor. Like many chemical businesses, Kem One is an arbitrage of commodity prices, paid for with high CapEx. Sometimes they generate cash, sometimes they need cash. So for various assumptions underlying those prices and future spend, we reason through the Sponsor's path of least resistance. We are discussing which options Apollo would likely choose and how they would drive bondholder value in the coming six months.
Post our review of Graanul's Q3 2024 results, our investment thesis on the credit remains unchanged. We have reviewed current demand trends, average selling prices for pellets, and the dynamics surrounding the renewal of existing contracts and how that has changed since Q2 2024. Based on insights from management and trends over the previous quarters, we have updated our financial projections for 2025 and 2026. To that end, we assessed Graanul's cost structure and working capital assumptions to gain a comprehensive understanding of their ability to generate free cash flow and de-lever going forward.
Q3 2024 is the company's first report since completing the refinancing of its debt over summer. Our main focus has been: how is the turnaround going? We have analysed the key drivers of the two divisions - EWP and Silekol, which include trends in pricing and volumes for this quarter and beyond. We have also looked at where gross margins, trends in working capital and capex were in the quarter and taken a view on their trends in 2025, 2026 & 2027 to come up with the free cash flow and de-leveraging profile till 2027.
Having only initiated on the name two weeks ago, we find the Q3 reporting mostly confirmed our views. APG still has areas we feel we don't fundamentally understand, but those pale in comparison to our perplexity with regard to its bond prices. As per initiation, we will be exiting the first leg of our strategy before Christmas, and are looking for the right window to re-enter next year. We have updated our model and tidied up our projections.