Europcar Memo 230620

Complex Restructuring Likely In FY 21 / FY 22 With Negligible Recovery On Non-Vehicle Debt. Buy € 2.375%11/2022 SSNs vs Short Sell € 24s & € 26s SNs & Equity
PUBLISHED: 23 June 2020
PAGES: 163
SUBMARKET: Europcar, Top Reports, Top Reports,


Why Read?

  • Understand why our projections of Europcar’s liquidity, normalised post-COVID-19 unleveraged FCF, net leverage and valuation point towards a complex business and debt restructuring around FY 21 / FY 22 
  • Understand the security package benefitting Europcar’s € 2.375%11/2022 Senior Secured Notes (SSNs) and why recovery is likely to be near full here
  • Understand why initial recovery on Europcar’s €600m 4.125% 11/2024 and €450m 4% 4/2026 Senior Notes (SNs) is likely to be negligible 
  • Understand risks to our thesis, including potential to rationalise Europcar’s footprint of stations down to a more concentrated core that is tightly aligned with post-COVID-19 leisure air travel demand, both in terms of source and destination markets
  • Understand additional liquidity levers remaining 
  • Understand how Europcar is more favourably positioned than US-heavy competitors, Hertz and Avis
  • Understand Europcar’s various fleet securitisation financing structures
  • Understand Europcar’s pre-COVID-19 “steady state” FCF
  • Understand Europcar’s accounting for its fleet across buyback, at-risk and operating leased vehicles
  • Understand the calculation of Europcar’s Adj Corporate EBITDA vs Adj Consolidated EBITDA, why the latter does not convert well to cash flow and why DCF EV should not further deduct vehicle debt


What’s New?

  • Deep dive analysis of Europcar’s various fleet securitisation financing structures – SARF, EC Finance Plc, UK, Australia / New Zealand and Goldcar fleet financing facilities – and the security packages benefitting each
  • Comparative post-COVID 19 key data points across the car rentals sector
  • Detailed financial projections across base, bear and bull cases


Questions Answered

  • What collateralisation do the SSNs benefit from and how well covered are the SSNs?
  • Why is initial recovery on the SNs likely to be negligible but upside may exist through eventual restructuring into post-reorg equity combined with rationalisation of Europcar’s station footprint?
  • Why is Europcar likely to need to restructure?
  • Does our bull case avoid a restructuring for Europcar and what assumptions are required to achieve this?