Sectors > Top Reports > Boparan Memo 310320

Boparan Memo 310320

Strong Q2 20. Expect Refinancing But Even Distressed Break-Up Likely Gives SSNs Recovery Of c. 90%. Buy SSNs, Sell CDS
PUBLISHED: 31 March 2020
PAGES: 333
SUBMARKET: Boparan, Top Reports, Top Reports,


Why Read?

  • Understand why refinancing is highly likely despite still high net leverage of 6.3x at Q2 20 LTM (9.1x including the consolidated pension deficit), Q2 20 LTM Adj FCF still heavily negative at -£118m (excluding disposal proceeds) and limited time until £713m of debt comes due in 2021
  • Understand coronavirus upside to Boparan’s revenue and Adj EBITDA, particularly in Q3 20, given available recent data points on yoy poultry sales and supermarket sales growth where Boparan over-indexes
  • Understand why we think Boparan still has substantial levers to increase Poultry Adj EBITDA, not just in FY 20 but also beyond
  • Understand hidden value within Boparan’s Poultry segment that could be unlocked in a UK (pre-pack) administration that breaks up the Group if refinancing fails
  • Understand the priority of Boparan’s pension deficits relative to its Senior Secured Notes (SSNs) in a UK administration
  • Understand who the likely buyers would be of each of Boparan’s businesses in a break-up of the Group and on what valuations

What’s New?

  • Updated coronavirus-impacted financial projections (including of liquidity), valuation and sensitivity analysis
  • Entity-by-entity deconstruction of solo company financials comprising the Boparan Holdings Limited (BHL) Restricted Group (RG) and application in distressed sum of the parts (SOTP) valuation
  • Listed and transactions comparable multiples across Poultry, Meals and Bakery (biscuits) segments and application in distressed SOTP valuation
  • Analysis of major opportunities to increase Adj EBITDA
  • Analysis of Mr Boparan’s business empire outside of BHL, access to cash and potential strategies with respect to BHL

Questions Answered

  • Why do we think our base case FY 20 Adj EBITDA estimate of £122m is conservative with further upside potential both within FY 20 and beyond?
  • How does Boparan’s cost structure and production footprint compare with UK poultry competitors, Moy Park and Avara, and what opportunities does this create?
  • Who would be the likely buyers of each of Boparan’s businesses in a break-up of the Group and on what valuations?
  • What is the combined access to cash of Mr Boparan and his other key businesses outside of BHL and what strategies might Mr Boparan pursue and with what impact on SSNs holders?
  • Why is there hidden value in the Poultry business and how can it be unlocked?
  • Which major opportunities exist across the Group to increase Adj EBITDA?
  • How much of the deterioration in Poultry’s LFL Adj EBITDA since FY 17 is down to feed cost inflation and can this now be recovered?
  • Why do UK poultry competitors now have higher Adj EBITDA margins than Boparan?
  • What would be the likely priority of Boparan’s various pension deficits relative to its SSNs in a UK administration and what alternative scenarios are possible here?
  • Where do we see recovery on the SSNs across a range of administration scenarios?
  • How is Boparan’s Adj EBITDA made up entity-by-entity?
  • How much could Fox’s Biscuits be sold for and to whom? Same for Holland’s Pies?
  • How sensitive is Boparan’s Adj EBITDA to poultry feed costs post implementation of a high degree of contractual customer pass-through?
  • How vulnerable is Boparan to the scheduled increase in the national living wage?
  • Does Boparan have an adequate liquidity run-way to attempt a refinancing or orderly break-up of the Group via a pre-pack administration?
  • What are the key entities across Mr Boparan’s business empire?
  • Is vertical integration an advantage in poultry?
  • Are business disposal proceeds coming through fully in the cash flow or are payables balances being paid down pre-disposal?
  • How has Boparan done on its acquisition of Northern Foods and subsequent unwind of significant parts of this?

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