Hema - Of Corona, Nuisance and Value

All,

Recent press articles have not been well managed. What they mean for the SSNs and SUNs.

- Ramphastos have not so elegantly chosen to discuss restructuring in the media before doing so with creditors. The company, has reached a deal with certain Dutch landlords to halve rent for April and May is looking to extend this deal to all its dutch stores, which are still trading, but at much reduced turnover. 

- Ramphastos are quoted in the media as having made the buy-back of the PIK note subject to a creditor haircut. 

- No advisors are yet confirmed (as evidenced by the media leakage) and Ramphastos could lose the company to creditors in what might be one of the first applications of the new Dutch regime.

- We expect Ramphastos to delay any proceedings until either stores re-open or the various cure periods expire as any meaningful restructuring will have to take place once the extent of the damage is broadly known. However, we doubt that the investor can hold on to Hema this year as the value very much breaks in the SSNs now. Ramphastos would have to find an arragement with the PIK holder (note that given both are far out of the money now the chance of this is rising) to avoid handing an event to the SSNs. Meanwhile leverage is rising even further.

- Note that the company has very loose docs and can raise further leverage ahead of the SSNs - in particular wrt. Supplier payments, as has been the case in the past (see Hayfin line cancelled in 2018).

- The SUNs are structurally pari pass to the SSNs, but subject to an English law intercreditor agreement subordinating them comprehensively. If Ramphastos find a solution, they would likely have to agree to a significant haircut or else receive nuisance value - if that.

Wolfgang