Senvion

All,

Moody’s downgraded Senvion this morning to B3 from B2, both regarding corporate family and probability of default. As for the bonds, the rating has dropped from B3 to Caa1.

Rationale:

- Guidance revision: Worse than expected profit warning / revision of guidance. Cost overruns and delays in installation add to the weak earnings profile. 

- Underlying issues: Moody’s go on to cite: the intently competitive and industry, loss making projects and the limited diversification in terms of product suite, revenue distribution and end-market. We agree 100%.

- Order Book: Moody’s however evaluates the order book as positive, something we cannot begin to agree with. In our view Senvion is structurally handicapped in this market and is struggling to ramp up order books as much as it needs to.

- Cashflows: Choppy, but positive Free Cashflow for the year 2019.

- Liquidity: Consider liquidity sufficient.

- Covenants: Believe the company has sufficient covenant headroom.

Negative Outlook:

- “Concern that Senvion may be challenged to materially restore its credit metrics in 2019”. That’s a little too vague for us.

Reasons to change rating unfortunately only relate to what may be observable on the financial statements and do not refer to the underlying business or any events.

There are also some inconsistencies wrt. Order Book vs. EBITDA vs. CF over the next year that do not really fit together in our model.

We’ll be out with Senvion after Tomas Cook.

Wolfgang