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Atalian Memo 100420

Atalian. Adverse WC May Break Liquidity At Q2 20. Liquidity Options Available. French Rehabilitation Further Down The Line? Buy At Prices ≤ 50 Cents
PUBLISHED: 10 April 2020
PAGES: 101
SUBMARKET: Atalian, Top Reports, Top Reports,


Why Read?

  • Understand why Atalian’s liquidity is at risk of breaking in Q2 20 and the liquidity levers available to bridge any shortfall
  • Understand why, even with Atalian trading at just 4.1x FY 19 Adj EBITDA (IFRS 16) vs peers in the 8-11x range, we would wait for entry points on Atalian’s Senior Unsecured Notes (SUNs) at 50 cents or below to buy or to add to existing long positions
  • Understand how an eventual potential French rehabilitation proceeding may be implemented (but likely not until closer to the FY 23 RCF maturity, if at all) and the key drivers of SUNs recoveries herein

What’s New?

  • Updated financial projections (including of liquidity) and valuation to capture intensification of coronavirus crisis, informed by recent peer company data and Atalian’s FY 2019 results call
  • Estimation of Atalian’s capacity for additional secured debt, taking into account RCF maintenance covenant (based on net secured leverage excluding factoring), Indebtedness and Lien covenant carve-outs in Atalian’s SUNs and how far Atalian could plausibly stretch its balance sheet unencumbered net working capital position through factoring
  • Restructuring analysis under French rehabilitation proceedings and estimation of SUNs recovery rates under a variety of scenarios
  • Evaluation of deleveraging potential based on various shareholder and company actions

Questions Answered

  • What liquidity shortfalls do we project at Q2 20 in our base and stress cases?
  • How does the French State guarantee-based loan scheme work and what issues might Atalian encounter in practice in trying to use this to bridge liquidity shortfalls?
  • Which actions is Mr Julien likely to consider and are they game-changing?
  • What do recent peer company data tell us about potential revenue and Adj EBITDA declines in Atalian’s key coronavirus-impacted quarter, Q2 20?
  • What are the likely working capital drivers and movements in Q2 and FY 20?
  • What would the recovery on the SUNs be in French rehabilitation proceedings and why do believe any potential restructuring, if it were to occur, would not be likely until closer to the RCF maturity in FY 23?

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