Emeria - comments

Emeria’s results were disappointing yesterday, and bonds should have reacted more than they have. French B2C RRES is now well short of our projections, as is French B2C. Germany and Switzerland (small now) are actually ahead. In particular, we are now seeing Switzerland provisions unwound, suggesting the business is turning around, but it is still dragging on margins. The UK business is healthy, and the target of unexpectedly resurgent M&A. 13 acquisitions closed in Q126, vs. 4 the year prior. Most are relics from past agreed deals, but we were admittedly surprised by this number. Adj. EBITDA for the quarter, mostly due to the weak French business, came in a full €10m below our expectations at a mere €60m, driving leverage. €23m of cash is stuck in guarantees for commitments outside the consolidated perimeter, and to fund it all, the RCF was drawn a proud €100m, only months after selling Asurimo. The company won’t be able to refinance on this trajectory without either shareholders’ support, a 3rd party transaction leveraging the equity, or an A&E that might threaten the SUNs, depending on x-holders holding out one way or the other. The SUNs would be too small to enter a Sauvegarde for, and if the shareholders were to commit to injecting fresh cash in a pre-pack, they’d be better off injecting it to avoid the situation in the first place.