Mobico - comment - positioning

Solid for the bonds, but the perps must be careful. We are exiting our residual position today at 64p/£. Results were positive as expected, and the company raised guidance. But management had already flagged it would raise guidance on resolution of the German situation, and so the guidance raise still falls slightly short of our model forecast, particularly in the UK. The company is still under an NDA with the PTAs and thus unable to give full clarity, but the settlement includes the return of £132m of past cash advances Mobico received while making losses. We are not yet fully satisfied with the accounting logic presented during today's call and will have to seek clarity on some points. The payments will be phased. On Alsa, management will seek to retain the contract volume, age fleet, drop costs and hope for the lower prices to kindle higher volume so as to make up the regulatory headwind within a 3-5 year time-frame. The UK asset will be "monetised", which sounds like a whole business securitisation or otherwise balance sheet offloading with a service contract. Management indicated in no uncertain terms that it is working with advisors on a debt restructuring and will approach creditors in H226.