Lecta Memo 020919
- Understand the background behind Lecta’s tumultuous year to date and the precipitous drop in bond price
- Understand liquidation recovery value and potential upside from sale of electricity business
- Understand closure costs in Coated Wood Free (CWF) paper and impact on liquidation recovery value
- Understand CWF and Specialty paper segments and their impact on valuation and FCF generation going forward
- Understand the working capital, liquidity and what the covenants (dis)allow in terms of monetisation of trade receivables
- Understand options available to the company in order to restructure successfully
- Understand the capacity to secure additional debt financing to finance continued expansion into specialty papers
- Understanding the existing ownership structure and their commitment to the long term future of Lecta
- Decomposition of CWF vs specialty papers and outlooks for each
- Importance of the speciality business within Lecta and future opportunities within that portfolio
- Deep dive on the bond indenture to understand what opportunities exist for both shareholders and bondholders to enhance the liquidity situation clearing a path towards further expansion in specialty papers
- Ability of Lecta to continue operating in the absence of additional financing
- Understand the ability of bondholders to effect a consensual restructuring that will clear a path towards equity ownership
- Key highlights from Q2 2019 results call
- What scope is there for Permitted Liens and Permitted Collateral Liens to use Lecta’s trade receivables to generate further liquidity?
- What is the outlook for CWF and specialty papers? Will capacity reduction in European CWF now exceed demand reduction over the rest of 2019 – 2020 and provide some support to CWF prices?
- Is there a way back for CWF?
- What is our valuation of Lecta?
- Options available to restructure the financial position of Lecta
- What are the implications for bondholders if Condat Line 8 conversion to Speciality happens / does not happen?
- What are the potential returns to bondholders in various restructuring scenarios?