Sectors > Top Reports > Rekeep Memo 200420

Rekeep Memo 200420

Rekeep. Resilient Business Mix & Strong Liquidity To Manage Through Coronavirus. Buy € 9% 6/2022 SSNs Yielding 14.2%
PUBLISHED: 20 April 2020
PAGES: 143
SUBMARKET: Rekeep, Top Reports, Top Reports,


Why Read?

  • Understand why Rekeep’s revenue and Adj EBITDA are likely to be significantly more resilient to the coronavirus shock than its peer group (Atalian, ISS, Sodexo and Compass) in spite of its geographic concentration in hard-hit Italy
  • Understand why Rekeep’s liquidity position is resilient across our base and stress cases, without even considering any potential access to state guaranteed loan schemes
  • Understand why we believe Rekeep can successfully refinance ahead of its significant debt maturities (RCF and non-recourse factoring facilities maturing Dec-21 and Senior Secured Notes, SSNs, Jun-22)
  • Understand why, even though there is only a very small equity cushion in our stress case and potentially priming risks that could dilute SSNs recovery, we view Rekeep as our preferred debt play in the HY Facility Management sector, over and above Atalian
  • Understand Rekeep’s history of litigation and the FM4 fine
  • Understand the Facility Management and Laundering & Sterlisation businesses and Rekeep’s positioning within them

What’s New?

  • Peer group comparison of client mix – segmenting revenue by client for Atalian, ISS, Sodexo and Compass into the structure reported by Rekeep (Healthcare, Public, Private) to identify how much more exposed Rekeep is to healthcare / public sector / essential services contracts that remain in operation even in hard-hit Italy
  • Peer group comparison of liquidity positioning and resilience
  • Financial projections (including of liquidity) and valuation to capture intensification of coronavirus crisis, informed by recent peer company data 

Questions Answered

  • What are our base and stress case liquidity and net leverage projections for Rekeep through each quarter of coronavirus-impacted FY 20 and beyond?
  • How does Rekeep’s liquidity vs annual expenses (ex. D&A) compare with that of peers?
  • Why do we think our revenue and cost flexibility assumptions through FY 20 are consistent with peers’ actual experience thus far and forward guidance, taking into account geographic and end client differences across firms? 
  • How do the Italian SACE and CDP State guarantee-based loan schemes work in case Rekeep needs them?
  • What are the likely working capital drivers and movements in Q2 (likely the key coronavirus quarter) and FY 20?

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