Kem One - comment

Kem One bondholders have organised under law firm Paul Hastings, to provide additional new money or, more importantly, to ensure any new money providers don’t prime the existing bonds. Kem One will likely require €150m+ of fresh cash, but this amount increases by the week.  Rumours started at the €100m level, but the most recent estimate has doubled to €200m, based on €80m EBITDA,€110m CAPEX (which is higher than our assumption), interest, and repayment of the RCF which was €30m drawn just after September quarter end. Note, Kem One’s cash balance is elevated due to reporting its ownership of €30m of the bonds as cash and marketable securities. In reality, the cash balance as of September was as low as €4m.

The Paul Hastings Group is reported to hold more than 50% of the bonds, but still unable to prevent Kem One from securing additional super senior debt. Under various baskets, the documentation allows for c. €200-250m of additional super senior debt ahead of the bonds.  With no construction turnaround expected, Kem One will not benefit from any macro tailwinds in FY25.  However, the bonds remain supported at the current mid-70s level due to the cyclical nature of PVC and a hope/expectation a turnaround will occur before maturity in 2028.