Aggregate - Cleansing of the untouchables
All,
Please refer to our unchanged analysis here.
While certain short-seller reports have flamboyantly alleged all kinds of fraud, it was never about the legal. So the news that independent report by Hogan Lovells clears Aggregate of all Viceroy Allegations” need to be viewed in context, as the frail corporate governance has now been exposed. However, the report should help in one important context. It should alleviate concerns of a formal procedure against Aggregate and any fatal consequences associated with that. It should be key in opening Aggregate’s access to the market again - at least on project level.
VIC and Fürst:
- Aggregate are scrambling to bring together investors to refinance two of their construction assets - each in a different context, but both require new or re-committed creditors.
- The clearance from career risk associated with lending to a borrower under heavy fraud allegations should allow more creditors to take a view on Aggregate and opportunistically clip a higher coupon than they’d ordinarily could.
- Aggregate have been touring financing parties around Portugal in recent weeks and the senior nature of the Fürst exposure that needs financing is also something that under normal circumstances should place easily.
Positioning:
- We continue to hold a 5% of NAV position at Aggregate as well as a 2% position in the Adler shares and a 2.5% position in the Consus convertibles. We see the convertibles as deeply protected by mountains of ADO bondholder interest in a Going concern at Adler. We see the Adler shares as deeply undervalued - even when adjusting for some of the worst Consus blunders. And we see the Aggregate bonds going to the mid 80s and beyond once the opcos are refinanced and the value in Adler becomes more visible.
- While today’s news are not driving those assets through the roof by themselves, we are confident that they will be important in removing the “untouchable” label from Aggregate. From here it may be more a question of price.
Wolfgang
E: wfelix@sarria.co.uk
T: +44 203 744 7003