Shareholder meeting at Dia today

All,

Its Shareholder meeting at Dia today. Yesterday DIA have released additional information in relation to their financial facilities.

The banks have agreed to extend existing maturities to 31 March 2023

Subject to rights issue of €600m (the Company’s option) LetterOne would have to increase its capital injection by €100m to comply with these conditions.

Other conditions are:

1) sale of the non core businesses with €100m proceeds to be used for debt repayment (LetterOne reluctant to sell these businesses).

2) A minimum EBITDA for 2019 and 2020 of 174m.

In relation to the bonds:

- Banks propose moving security of at least 60% of the stores (by EBITDA) to a subsidiary wholly owned indirectly by DIA - thus moving senior to the bonds.

- The 2019 bonds needs to be refinanced (not repaid from rights issue) to a maturity longer than January 2023 - again banks to move senior. 

In summary, Banks are working with the Management’s proposals and the Morgan Stanley rights issue. 

For their own proposal, LetterOne need a majority of the remaining shareholders ~35% to vote for their proposal. GS and a number of risk arb and distressed funds should be on their side as, in contrast to the company/bank favoured rights issue, the LetterOne proposal allows for a profitable exit, not a costly dilution. 

However, the share price yesterday noted around 61c, vs. The 67c offered by LetterOne, suggesting that the market is nit convinced that LetterOne will succeed. 

In the context we were looking at the 23s yesterday, as the prospect of a Spanish insolvency looks ever more remote. Duration is relatively long. YTM is 10% - not amazing. But at 69c/€ there is significant upside. 

Tomas is your analyst.

Wolfgang