Adient

All,

Please find an expanded analysis of Adient here.

We are comfortable with the risks embedded in the bonds and that the automotive supplier will stabilise cash flows sequentially demo here (on admittedly easy comps).

The remaining question from here really centres around the timing of an entry. While operating results should improve, net cashflows will continue negative for some time, leveraging up the company by at least another half turn over the next quarters. Half a turn is significant wrt. to the weak cash conversion of the company. But in the scheme of things it is also an increase the bond market has largely prepared itself for. By contrast the equity market feels a bit behind and more focused on LTM stats. So it may be a question of rotating into the equity at a later stage.

Thus in a market that seems prepared to reward good news on long duration risk assets, we are pondering tactics on entering these bonds and perhaps a small allocation to the equity.

Wolfgang