Boparan - Looking at the buckets

All,

Please find our unchanged analysis here.

Boparan’s options for raising fresh cash are dictated by the terms of its SSNs and the RCF and the bonds have a £75m carve out for securitisation, this was would be senior to the existing SSNs (adding 0.6x turn of leverage ahead of the SSNs). Another option is an equity raise along with debt. The level of cash needed will become clearer at the FY results announcement on 24 November. Until then the company is precluded from speaking to analysts unless they make a public statement. We are surprised that the fall in bond price was only around 5 points, the drip feed of bad news seems to have dulled investor sensitivity to bad news about Boparan. We are short the name for 5% of NAV via the standard 5-year CDS.

Boparan will need to utilise the buckets in the SSN documentation:

- The company is permitted to put in place a securitization facility of up to £75m, this facility would be secured on receivables and would be senior to the SSNs. Boparan's key customers are the top supermarket chains in the country. At April 2021 it had £206m in trade receivables, it has an invoice discounting facility of £80m (£74m drawn) a customer factoring platform for another £64m. This would allow ample room to put in place a £50m securitisation facility.

- Boparan, cannot re-open the SSN or issue new secured debt. Senior leverage of 5x (as at April 2021) against a covenant of 3.5x.

- In terms of raising subordinate debt, Boparan is hemmed in by the Fixed Charge Ratio of 2.5:1, we calculated that the ratio was 2.4:1 in April. Some debt could be raised but not very much.

Boparan could raise equity:

- Not only could Boparan raise fresh equity, it could also raise debt equal to 100% of the cash received because of the sale of an equity interest.

Positioning:

We are short Boparan for 5% of NAV via the standard 5-year CDS. Our rationale for the short has been the increasing cost winds from labour shortages, through energy costs to transport. We still expect that the RCF was drawn before year end and see the latest news as Boparan looking to build a liquidity buffer as conditions have worsened.

We look forward to exchanging ideas on this with you all

Regards,

Aengus

'Chicken King' Boparan seeks £50m in funding amid supply chain crisis | Business News | Sky News 

Aengus McMahonBOPARAN