“The growth targets are fine. Letters of credit are the same story and every retailer has this problem. Supplier risk doesn’t always crystalise as a letter of credit but at least its manageable this way. One can adjust metrics for letter of credit but then one should adjust leverage for all retailers, but that wouldn’t achieve much,” independent special situations firm Sarria said. “That said, you can’t entirely ignore it, as usually that risk is compensated out of gross margin and not interest.”
Read MoreShould any refinancing not materialise, then there remains a risk of a debt restructuring according to a 17 June desk note from independent special situations firm Sarria.
Read MoreSarria noted they were short earlier in the year thinking they would run out of cash, and it was “astonishing” they didn’t. “The franchise is unimpaired and the move to online still stops at their price bracket, but they are now more levered than before – despite appearances,” they commented. “The EUR 100m cashflow in June only shows that the Takko had good sales and management said as much. We can rest assured that the EUR 150m [cash balance] won’t be around at quarter end.”
Read More