GALAPAGOS

All,

We think there is a profitable core within Enexio and in particular Kelvion. But while management have not given us any timeline or other framework whatsoever and given the history in recent years, we are very cautious about the “this time its different” argument, even if the BCG plan sounds promising. Triton have been very supportive in 2018 and we would be surprised if the sponsor let the company go at this stage. But ahead of any more concrete visibility, these bonds are like catching a falling knife to us (both SSNs and SUNs). Once we hear of a sale or closure of the Dry Cooling business we might reconsider, but until then we are looking for a bottoming out of performance at the level currently reported and will be watching that from the sidelines. 

Nonetheless, we think that an event is immanent. We see the company both cash flow negative as well as in need of equity cure. Triton have shown in the past that they can think creatively about the consolidation circle and perhaps one of their best moves would be to take the Dry Cooling business out themselves, so as to reduce the impact on Galapagos in total. In the meantime however, we think that more than mere equity cure is needed to finance the footprint consolidation of that business and thus consider this a further reason to abstain from investment at this time. 

Attached is our initial analysis of Galapagos. The SSNs including Pimco and Barings are reportedly working with Moelis and a legal advisor. We are not aware of any organisation by the SUNs thus far. 

Wolfgang