Senvion

All,

Attached is our analysis of Senvion. (download it here)

The name deteriorated somewhat more quickly than we had anticipated, although it is now clear to us why that was so. 

We will not be taking a position in the SSNs until we see more clearly though the legal options and have had more conversations, with German legal advisors on the matter.

Fundamentally, Senvion have all but lost their home market, which accounted for 75% of sales as recently as 2017. The ramping up of overseas business comes at a lower margin, higher risk and with longer lead times, which is why business is drying up in the interim. A likely working capital swing poses an additional burden on the company’s liquidity position, requiring a fresh cash injection of - we think - E200m to restore confidence if nothing else. Also note that the treatment of the (non-cash, but significantly committed) L/Cs plays a major role in the valuation. Thus in total the SSNs may struggle to argue they are in the money although due to their secured nature and size they should at least hold significant nuisance value, if not a little more

A long at the current levels would be a bet on the “generosity" of Centerbridge and on the shareholders’ and de-facto super senior facilities’ unlikely entertainment of a German in-court scenario, where the L/Cs would be at risk of being drawn and client contracts / orders could be lost. But we will have to do some more legal work before mustering the necessary confidence to go long into this situation.

Wolfgang