Boparan - When the glass goes from 1/4 full to 1/2 empty

All,

Please find our updated analysis of Boparan here.

Overall, its 1:0 to management. Despite having been exceptionally light on detail at the time, management have delivered the EBITDA growth they promised and it is not hard to conclude that the remainder of £5m per quarter will be achieved (has in fact already) to lend credence to the p.f. numbers the company has presented.

That takes the company to the kind of level where the market would have refinanced it last year and where the company is NCF neutral - including payments under its pension liabilities. But in the meantime the glass has gone from 1/4 full to 1/2 empty.

With the glass half empty and only limited time until the entire capital structure comes due next year, the large off-BS liabilities are remaining in focus, though which - even with all p.f. achievements included - the company remains over 8x levered. On that basis a refinancing is out of the question. However, ignoring off-BS liabilities the company is less than 5x levered and in any event its NCF neutral and liquidity is now adequate. So it is not hard to see how bondholders could amend and extend rather than pick a fight with a very we’ll positioned owner / operator. 

The market is trading the bonds on 5x p.f. EBITDA - including pensions, but ignoring the factoring facilities. While that does not sound outright cheap for a restructuring negotiation - in this market anyway - the stability of the company and the sufficient cash balance (RCF fully drawn) as well as its numerous marketable assets make Boparan reasonably attractive - certainly with significant upside in the medium term. 

All the above is caveated by Covid19-19, We note of course that China has ordered various chicken culls on account of the virus. So far however, for Boparan it has only been a driver of “unprecedented demand”. 

Wolfgang