Pro-Gest Memo 251019
- Understand why Pro-Gest’s liquidity is likely stronger than market participants believe
- Understand why Pro-Gest is likely to be a desired M&A target and its market-implied 3.5x EV / 2019E Adj EBITDA provides significant bondholder upside vs peers on 8.6x
- Clear up market confusion on recent events – Mantua plant authorization; uncommitted working capital credit facilities
- Understand potential maintenance covenant breaches (triggers at Cartiere Villa Lagarina solo, Pro-Gest SpA solo and Pro-Gest consolidated), cross-acceleration and cross-default
- Understand many scenarios regarding: Mantua plant authorization; magnitude and timing of final anti-trust fine; availability of uncommitted working capital credit facilities or equivalent new receivables factoring facility; revenue & EBITDA contraction potential vs 2006 – 2009 downturn given increased supply and adverse cycle; shocks to days payable outstanding, days receivable outstanding and days inventory outstanding
- Understand importance of looking at Cartiere Villa Lagarina solo (Italian-language) financial statements and analysis thereof
- Understand Italian local press – key issues in Mantua plant authorization; potential sale of Mantua plant
- Understand Italian law restructuring options to deal with Pro-Gest should it need to restructure
- Understand key drivers in recovery analysis and why base and bear case recoveries both come out higher than current trading levels
- Detailed liquidity (and full financial) analysis with sensitivities to: Mantua plant authorization; magnitude and timing of final anti-trust fine; availability of uncommitted working capital credit facilities or equivalent new receivables factoring facility; revenue & EBITDA contraction potential vs 2006 – 2009 downturn given increased supply and adverse cycle; shocks to days payable outstanding (DPO), days sales outstanding (DSO) and days inventory outstanding (DIO)
- Analysis of why Pro-Gest is likely a desirable M&A target – market leadership in structurally growing Italian market; highest EBITDA margins amongst European peer group; competitive advantage of wide local production footprint
- Analysis of Cartiere Villa Lagarina solo financial statements
- Under what circumstances and when would liquidity break?
- What is the recovery range on Pro-Gest’s 3.25% 2024 senior unsecured bonds across our full range of scenarios and sensitivities?
- How would a debt restructuring work for Pro-Gest under Italian law? Art. 67, Art. 182-bis; Art. 161
- How deep was the 2006 – 2009 downturn in European containerboard and corrugated board and packaging and how do our base and bear cases compare with this?
- What is the outlook for the demand-supply balance in the Italian containerboard market?
- What is the potential realizable value for the Mantua plant if the project is abandoned?
- How has Pro-Gest compared with peers over time? Revenue growth; EBITDA margin; DPO, DSO and DIO; capex; ROIC; FCF; leverage; valuation multiples
- What are the key points from Pro-Gest’s various bond, mini-bond and credit facility indentures to be aware of?
- What are the key catalysts and dates for these?
- What exactly are the key issues of contention around the Mantua plant’s Integrated Environmental Authorization application?
- View, Variant Perception & Recommendation
- Business Overview
- Industry Overview
- Group Structure & Capitalization
- Historic Financial Analysis
- Trading Update
- Base Case Forecasts
- Bear Case Forecasts
- Liquidity & Restructuring
- Investment Considerations