Galapagos worth E700m - SSNs are fine

All,

Although the fighting itself introduces yet more uncertainty when time for the company is really of the essence, the SSNs remain well in the money, particularly considering the fight for value behind them. We are comfortable with Frank Kebekus, who is a known quantity in the German insolvency business. And even through the German system does not afford creditors or shareholders the same degree of control as the UK do, we consider the company in safe hands.

Update:

In its recently filed law suite in the NY Supreme Court, Signal value Galapagos at E700m (intrinsically). While the context of the value is undoubtedly chosen to put the SUNs at par - post some new money - it is nonetheless an impressive number.

The law suite is also likely more of a gambit in what has become an astonishing fight-back by unsecured bondholders, on who’s Ad-Hoc committee Signal are sitting.

Flashback:

The day the London High Court was to hear the case for Galapagos Holding’s Scheme of Arrangement, the SUNs revealed that they had exercised their share pledge in Galapagos Holding, removed its newly appointed directors (following its relocation to the UK) and had nominated my old friend Jan Bayer instead. Jan had quickly filed for insolvency in the District Court of Duesseldorf, which he had pre-briefed, who promptly appointed Frank Kebekus as administrator - complete with all powers to wind up the company.

Status Quo:

Having lost control, Triton are appealing against the appointment on formal grounds, while the SSNs are hoping to re-gain their control via their own share pledge enforcement in Galapagos SA - structurally sr. to Holding. This sounds reasonable to us, although far from certain, given German proceedings have already begun.

Note:

Galapagos could end up setting an interesting precedent regarding the use of German proceedings as a tool for unsecured creditors - if they are quick and benefit from the right share pledge. It’s unlikely to become a big trend, given the cat is now out of the bag, but it's perhaps worth keeping an eye on.

Wolfgang