AA - recent speculation

All,

There is continued speculation surrounding the refinancing options available to the AA plc for their 2022 maturities.  We do not expect any announcement tomorrow (Friday) at their AGM.  The Company has some time on its side with no maturities for 2020 or 2021.  Any discussions with bondholders is likely to be post H1 results in September, when the Company is likely to seek a similar deal achieved in February 2020 which extended the £325m of the Jan-22 A5 Notes by 5.5yrs.  This will clear the way for a straight-forward refinancing/extension of the B notes in 2021.  

Other options been discussed are issuance of convertible bonds and/or sale of a division, namely the insurance segment.   We see zero possibility of a sale of insurance arm.  This business is in growth phase and any sales proceeds would have to be used to pay down debt within the Whole Business Securitisation, namely the A notes, and does nothing to refinance the B notes. An issuance of convertible bonds, given the current market capitalisation is also seen as unlikely.  

The market has got excited by the appointment of Evercore to help facilitate a refinancing but we are expecting little traction on refinancing until post H1 results, at a minimum.  

Tomorrow (Friday) is the AGM, but historically the Company has provided very little updates at the Annual meetings. 

Any questions, please do not hesitate to contact us.

Tomas