(CapitalStructure) Haya Real Estate bondholders urged to organise ahead of likely 'difficult' refinancing negotiations with company and sponsor.

14/10/2021

Haya Real Estate bondholders are being advised to organise while the company examines refinancing options with Houlihan Lokey.

Speaking on a real estate webinar today (14 October), Sarria analyst Tom Mannion said the refinancing negotiations would likely be "difficult" given Cerberus is on both sides of the table as sponsor and major customer. "It's definitely in the interests of bondholders to coordinate in this situation," he told attendees.

With €425m of fixed and floating rate bonds falling due in November 2022 - and concerns over some large contract renewals for the business - Mr. Mannion said he believed the most likely scenario for the notes was an amend and extend style transaction, potentially with a haircut. "I don't envisage a restructuring," he added.

Haya Real Estate's €214.9m 5.25% senior secured note was recently seen at 81-85 and the €209m FRN at 81.125-84. The bonds dropped from the 86-87 level after the news of Houlihan's appointment late last month.

As previously reported, advisors consulted noted the bondholder organisation process might be slower than typical situations, as many of the bonds are held by long-only CLOs. As an example, BBAM Euro CLO I held €2m of the FRN as at May 2021, documents show.

Linklaters is still believed to act for Haya Real Estate, after advising the company during its 2017 bond issue. Latham & Watkins meanwhile acted for the bookrunning banks on the bond issue.

Haya Real Estate manages real estate and NPL assets for customers such as Sareb, Bankia, Cajamar and Liberbank, as well as assets owned by Cerberus.

A main point of concern for Haya Real Estate is the looming expiry of a major contract with Spanish bad bank Sareb, for which Haya managed €12.4bn of assets out of the group's €30.5bn total at end-June. The contract expires at the end of June 2022; in its most recent Q2 2021 results management warned that renewal was uncertain and said it expected a highly competitive tender process that might run into next year.

Cerberus-linked contracts include an eight-year Apple agreement for real estate assets signed in 2019, and an eight-year REO management contract with Divarian. Haya is also the sole administrator of a few small portfolios of guaranteed real estate assets acquired by Cerberus. In total the contracts comprised €6.9bn of AuM at end-June 2021, nearly 20% of the company's total AuM.

The group's other key contracts for real estate management services include a 10-year agreement signed with Bankia Group in April 2018; a 10-year agreement signed with Cajamar Group in June 2014; and a seven-year agreement signed with Liberbank in August 2017.

Haya Real Estate reported H1 2021 results at the end of July showing transaction volumes of €1,242.7m, up from €947.2m prior year. NPL transaction volumes totalled €145.4m (up from €103.0m PY), REO Conversion €244.1m (down from €280.5m PY), and REO €853.2m (up from €563.7m PY).

Adjusted EBITDA for H1 2021 was €30.0m versus €20.6m prior year. LTM adjusted EBITDA at 30 June 2021 was €61.6m versus €90.0m at June 2020.

Source documents:

Q2 2021 presentation

Q2 2021 report

LTM free cash flow was €68.0m versus €75.9m PY, after capex of €9.6m (PY: €14.2m).

Net debt at 30 June 2021 was €335.6m, with cash of €88.3m; net leverage was 5.4x, down from 7.1x at end-December.

In November 2020, Haya Real Estate repurchased €35.1m of the €250m fixed rate notes at 85, and €16.0m of the €225m FRN at 84.875. The 2022 bonds have been largely under water since being issued, falling to the low 60s last year in the midst of the pandemic-related disruption.

Matt Dickinson