Jaguar LandRover - taking profit but remaining net long into Q2

All,

Please find our updated model on Jaguar LandRover here.

We are taking some profit in our position in Jaguar LandRover, reducing our position to 5% NAV in the Jan-26 Euro bonds.  We have held these from 66.5% to current levels (87.5%).   We are also readjusting our position on the short side, swapping the short position in the 2.75% of January-21 Sterling bonds  (which have traded from 95% to 100%) for a new 3.3% of Nav short in the 5.625% Feb-23 Dollar bonds.   We are maintaining the short to give downside protection into January 2021, when we expect a reversal of the Working Capital swings and increased sales from new model launches to materialise. 

The Company, under our projections would be £1.5bn FCF negative in the next quarter and this potentially will cause panic amongst bondholders if not accompanied by some positive outlook guidance.  Any rebound in sales will cause a rebound in working capital and cash generation

A 3:2 long/short ratio for the trade has marginal positive interest carry and given the c.10% point differential gives protection for jump to default.  

Happy to discuss further,

Tomás