Haya - Balance sheet fixed, but what about the business?

All,

Please find our unchanged analysis here.

The proposed amend and extend achieved by bondholders is in line with our best-case scenario and significantly better than the rumoured deal circulating in January. However, with uncertainty still surrounding the Sareb contract, and the loss of the Unicaja/Liberbank contract, we still view the bond as unattractive. The adhoc group currently stands at > 60%, and are in discussions with a further holders representing an additional 20% which will enable a 75% majority.

Proposed Deal

- In summary, bondholders are extending for 3yrs to November 2025, in return for a step-up in coupon to €+9%, a cash sweep above €25m, and 27.5% of the equity.

- The deal proposes extending the maturity by 3yrs to November 2025, with no call protection, but coupon increased to Euribor + 9%.

- More importantly, there is a cash sweep above a minimum cash balance of €25m, quarterly. In addition, any contract termination fees will be used to redeem bonds at par. Additionally, there is a transaction fee and consent fees of 0.5% respectively, to be paid at the exit.

- However, the new notes are to be issued out of a new entity, HoldCo 2, likely to be either Luxembourg or UK based. This entity will own 100% of the equity in Haya Real Estate SAU, the previous issuer of the bonds. The new bonds will benefit from a guarantee from the operating Company.

- It should be noted, that the new Holdco will provide a shareholder loan to Haya Real Estate SAU of up to €377.5m to strengthen the balance sheet of the operating entity. This will remove the potential requirement to put in new equity to strengthen the balance sheet.

- Bondholders will also receive 27.5% of the equity in Holdco 1, the owner of Holdco 2.

- Timing of the transaction is likely to be June 30th.

Investment Considerations:

- The proposed restructuring is favourable to bondholders, but the improved terms highlights the lack of visibility in the business, especially surrounding the Sareb contract. The Assets under management are going to reduce due to the loss of the Unicaja contract, and potentially reduce further due to the loss of the Sareb contract. Regardless of the outcome of the Sareb contract, further service contracts are likely to be renewed without further upfront payments, reducing EBITDA margins.

- The business is likely to remain cash flow positive in the medium term, however, question marks remain over the terminal value given the competition pressure and natural reduction in overall market size.

- With the bonds currently at 82% and a likely 11% repayment in June (from cash sweep), new investors in Haya create their investment at 80c with a €+9% coupon. However, post cash sweep, the business is likely to be 5.8x leveraged, and although there remains a cash sweep, the business is likely to continue to contract.

- We will continue to avoid the name.

Happy to discuss.

Tomás

E: tmannion@sarria.co.uk
T: +44 20 3744 7009

M:+44 7786 705 806
www.sarria.co.uk