Sectors > Top Reports > Selecta Memo 050520

Selecta Memo 050520

Selecta. Q5 19 - Shock & Restructure. Liquidity Tight. Deleveraging Potential Compromised. Restructuring Playbook For SSNs – Conviction Buy At 38.60
PUBLISHED: 05 May 2020
PAGES: 394
PRODUCT CODE: SELNSW0003
SUBMARKET: Selecta, Top Reports, Top Reports,

£2,670.00

Why Read?

  • Restructuring playbook for Senior Secured Notes (SSNs) holders – jurisdictional filing expectations; new money need and post-restructuring liquidity; EBITDA potential; expectations for mix of new SSNs and post-reorg equity; exit strategies from post-reorg equity; recovery rate / IRR / money multiple expectations; strategies available to KKR
  • Understand our new base, bear and bull case projections (including for liquidity and recoveries) following weak Q5 19 EBITDA and substantially weaker-than-expected liquidity position going into a coronavirus-impacted FY 20
  • Understand why Selecta, trading at 3.6x Q5 19 LTM EBITDA represents a deep value opportunity outright and compared to the European #2 player, IVS
  • Business analysis – segments, regions, clients, suppliers, substitutes
  • Industry overview – drivers; main private and public competitors; regulation
  • Pelican Rouge, Argenta Group and Express Vending acquisition analysis
  • Understand EBITDA potential with the expected synergies and one-off costs
  • Liquidity analysis and remaining liquidity levers
  • Understand the capital structure and the key terms of each instrument
  • Detailed DCF and trading comparables valuations

What’s New?

  • Restructuring playbook for SSNs holders – jurisdictional filing expectations; new money need and post-restructuring liquidity; EBITDA potential; expectations for mix of new SSNs and post-reorg equity; exit strategies from post-reorg equity; recovery rate / IRR / money multiple expectations; strategies available to KKR
  • Q5 19 exit liquidity position and EBITDA run-rate and coronavirus (COVID-19) impact on Selecta. Updated financial projections including for liquidity across base, bear and bull cases
  • Deep dive comparison of Selecta vs European #2 player, IVS, including cost benchmarking exercise to assess Selecta’s potential EBITDA
  • Q5 19 results analysis and comparison to our expectations

Questions Answered

  • What is the potential impact of COVID-19 on the business, both in the short and long term?
  • When do we expect liquidity to break and which additional liquidity levers remain?
  • Will the business be able to deleverage post the coronavirus disruption to the extent needed to refinance?
  • What recovery can be expected on the Senior Secured Notes (SSNs)?
  • What remaining basket availability exists for additional secured debt and why do we not envisage this being used substantially?
  • What strategies exist for KKR to recreate value for itself out of Selecta?
  • How does Selecta’s cost structure compare to IVS’ and what variability do we envisage to mitigate expected revenue decline in FY 20? Is there scope for EBITDA margin catch-up?
  • Why might working capital turn out to be a surprise positive in FY 20 (though we do not include this in our projections)?
  • What will be consumers’ appetite to use vending and coffee machines on returning to the workplace and public and semi-public locations as lockdowns ease?
  • Who might acquire Selecta?
  • Which part of Selecta’s persistent non-recurring items (NRIs) may turn out to be truly non-recurring post COVID?

 


  1. View, Variant Perception & Recommendation

  2. Business Overview

  3. Industry Overview

  4. Comparables ─ IVS Group

  5. Regulation

  6. Macro

  7. M&A

  8. Historic Financial Analysis

  9. Group Structure & Capitalization

  10. Trading Update ─ ER Q419

  11. Trading Update ─ ER Q519

  12. Coronavirus

  13. Forecasts

  14. Base Case Forecasts

  15. Bear Case Forecasts

  16. Bull Case Forecast

  17. Liquidity, Capital Markets And Restructuring

  18. Restructuring Pitchbook For SSNs Holders

  19. Investment Considerations

  20. Appendix

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