Victoria Plc - comment

Victoria’s latest transaction update and general meeting notice is modestly positive for the bonds, with both the operational recovery and refinancing continuing to progress. Organic revenue was up c.4% YTD to the end of August, or c.6% excluding Rugs, marking the Group’s first return to organic growth since 2022. The UK, North American and Australian businesses are all gaining market share, while EBITDA to August, excluding Rugs’ transitory losses, was ahead of the prior year. Rugs remains temporarily constrained by the relocation to Turkey, but the equipment is now in the final stages of commissioning.

More importantly from a credit perspective, the refinancing remains on track. The Company has now secured support from over 90% of the 2028 Senior Secured Noteholders, alongside Koch’s support and irrevocable commitments from 30.4% of shareholders. The shareholder vote is scheduled for 5 October, with completion still targeted for Q4. The transaction should remove the near-term refinancing overhang, extend maturities to 2031 and reduce annual financing costs by c.£34m.

As we have previously highlighted, the transaction is best viewed as a liability reshuffling rather than a meaningful deleveraging of the balance sheet. While management highlights a £300m reduction in debt and preferred share liabilities, only c.£18m of actual debt is removed, reflecting the 25% haircut applied to the €167m 2028 Senior Secured Notes. The remainder of the reduction comes from the conversion of Koch’s Preferred Shares into equity.

The key incremental positive is therefore the further de-risking of the refinancing, rather than a material change in leverage. With >90% of noteholders already supportive and the shareholder vote now scheduled, execution risk looks increasingly limited. The operational recovery and planned £70m of FY27 asset sales should also support liquidity through the transition, but even after the transaction, Victoria will remain over-leveraged. So there will be further transactions.