Sectors > Top Reports > Aldesa Memo 230919

Aldesa Memo 230919

Aldesa. Buy Senior Secured € 7.25% 2021 At c. 40 – Large WC Inflow & Asset Sales Coming
PUBLISHED: 23 September 2019
PAGES: 101
PRODUCT CODE: ALDESA0003
SUBMARKET: Aldesa, Top Reports, Top Reports,

£1,970.00

Why Read?

  • Understand how working capital and asset sales give Aldesa a better chance at refinancing than the market expects
  • Understand why Aldesa offers significant return potential
  • Understand key recovery rate drivers – receivables on completed vs uncompleted contracts; performance guarantee claim mechanisms and ranking; ranking of confirming lines; ability to sell assets into non-guarantor restricted group entities to which the shareholder could lend on a secured basis
  • Understand why Aldesa’s H1 2019 performance on new orders, revenue and EBITDA is not, on an underlying basis, that different to previous H1s 
  • Understand asset sale potential – restricted group non-operational assets; unrestricted group assets – and why proceeds from asset sales in the unrestricted group flow to the restricted group
  • Understand how restructuring options may be able to deliver 80% or higher value for senior secured notes
  • Understand Aldesa’s quarterly working capital drivers and whether H1 2019 working capital will reverse
  • Understand Aldesa’s liquidity
  • Understand Aldesa’s off balance sheet items and their potential impact on liquidity and leverage – factoring and reverse factoring; performance guarantees; sales of backlog
  • Understand the background behind Aldesa’s difficult 2018 and H1 2019 and the precipitous drop in bond price
  • Understand why Aldesa’s situation is different to the failed Astaldi and CMC Ravenna
  • Understand the distinction between restricted group and unrestricted group 
  • Understand Aldesa’s valuation sensitivity to working capital, new orders and cost of capital in terms of equity cushion and debt coverage
  • Understand in detail the Concessions business within Aldesa

What’s New?

  • Key recovery rate drivers / uncertainties
  • Indenture / restructuring considerations – group structure; guarantees; baskets for additional debt including carve-outs for secured debt at non-guarantor restricted group subsidiaries; collateral; potential for Aldesa to raise new 1st lien debt secured against underlying assets (rather than share capital) in the restricted group; governing law
  • Analysis of restructuring options as well as self-help options
  • Why Aldesa’s H1 working capital cash outflows (and H2 inflows) have been getting larger as the company has moved more to private sector business in Mexico, particularly within the energy niche within its Industrials segment
  • Liquidity projections – including stressing for further reduction in confirming lines and non-typical working capital reversal
  • Identification of potential assets for sale – both non-operational within restricted group and unrestricted group
  • Valuation of the business 

 

Questions Answered

  • Is Aldesa’s underlying business that much weaker in H1 2019 than prior H1s? 
  • Why were the banks willing to extend the RCF on favourable terms when the senior secured notes, against which they rank pari passu, are trading at c. 40 cents?
  • What flexibilities are there within the senior secured notes indenture that might allow the shareholder to protect their investment at the expense of senior secured noteholders?
  • Is there a self-help path to refinancing of senior secured notes for Aldesa?
  • What can senior secured note holders expect from any out-of-court restructuring?
  • When does liquidity break and what could accelerate this?
  • Is Aldesa’s H1 2019 working capital outflow likely to reverse and by how much?
  • To what extent does Aldesa’s working capital movement reflect reduced confirming line lender and customer appetite to extend credit risk or shift in business mix towards private sector and Industrial / energy segments?
  • What is our base case valuation of Aldesa and its key sensitivities? 

  1. View, Variant Perception & Recommendations

  2. Group Structure & Indenture Review

  3. Business Overview

  4. Key Events

  5. Restricted Group

  6. Concessions

  7. Comparables

  8. Liquidity

  9. Valuation & Sensitivity Analysis

Aldesa


Astaldi


CMC Ravenna


 


 

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