Aggregate - Of Clubs, Ghosts and Fire Birds
All,
Please find our unchanged analysis here.
Some two weeks ago, Rolf Buch, CEO of Vonovia was seen in the China Club in Berlin. As German RE is largely carved up between the members of that club and observing the deluge of deals since then, we have the distinct impression that some deal went down in those days that broadly fits the narrative we have been discussing for some time now, even if we are not sure about this detail or if we are merely seeing ghosts - probably. But even if that’s all idle speculation, it's the absence of certain other news combined with today’s courageous press release that has us going back to the Phoenix.
Going public:
- When I met Cevdet in October last year, he was asking if he should take an official board role at Aggregate and how that would be perceived. We also discussed a stronger advisory board. I was in favour of the step, and I still am now, although taking an executive role comes with further potential liabilities attached and not everyone will like it. Transparency and gravitas are good.
- Now that he has officially become CEO of Aggregate we find: 1) it’s a bold step forward and an admirable show of strength. 2) It was curious Günther Walcher had not fired him. As it turns out, he has either all along been invested or has now invested in Aggregate and owns - at least - 20%. Unfortunately, we do not know if Cevdet Caner has recently doubled down here.
- The addition of Michael Cohrs as advisory board member is another very strong signal, as is the decoration with a former chairman of EPRA.
The Phoenix:
- We have been floating the notion that Cevdet Caner is planning to take Adler private.
- This would likely work via Aggregate, provided they can survive the Vivion call and sell the QH asset in a timely manner, for the right price and - there is a first time for everything - for cash. We don’t think another reverse takeover would be successful.
- This deal still sounds like a pipe dream, but it has just come a little bit closer. It would be odd for anyone to step into the CEO role of a company that is immediately filing for insolvency. So if Aggregate are not doing that, then the Vivion deadline over the Fürst asset must have been resolved.
Vivion’s silence:
- Vivion had - and may still have a receivable of €220m from Aggregate, backed by AGGHOL 24s in the same amount, by a claim on the equity of the intermediate Lux holding and by three other assets that Guenther Walcher apparently holds away from Aggregate.
- We are wondering if we should be viewing the recent movements of portfolio JVs out of Adler, or in and out of Accentro in that context.
- We have neither heard from Vivion, nor from Aggregate on the matter, which suggests that neither have the bonds been cancelled nor has the cash been transferred.
- So for the moment, we are guessing that Vivion or a successor to their deal have agreed to postpone their trigger to September, in line with the deal struck with Oaktree - to wait for the QH sale.
Positioning:
- We remain invested in Aggregate in the 2024 bonds. We have lost a lot of money on that position and have sold down along the way, but the stub of our position we originally bought at 70.
- As per our recent mail on Aggregate, we think that the current bond price in the low 30s reflects liquidation value with only recourse to QH, which again is only available when buying out the converts that rank ahead on the asset.
- If Aggregate can keep their assets together, the bonds have material upside until the cash is spent on buying Adler for instance. The cash raised from QH would not suffice to repay all bonds, so we expect it to be used in a risky bet - Adler. After all, today’s press release almost said so much.
- As evidenced above, we have a lot of outstanding questions right now. As we answer a few of them, we may find we will want to expand or modify our position in Aggregate again.
Wolfgang