Sectors > Top Reports > Lecta Memo 020919

Lecta Memo 020919

Lecta - Bonds Are The Path To Ownership. Buy € 6.5% 2023 & € FRN 2022 Senior Secured
PUBLISHED: 02 September 2019
SUBMARKET: Lecta, Top Reports, Top Reports,


Why Read?

  • 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

What’s New?

  • 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

Questions Answered

  • 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?

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