Aggregate - rotating

Aggregate:

- We’ve been long and wrong Aggregate for some time. The latest action from Vonovia was admittedly not a risk we had attached a high probability to.

- With confidence in its finances further shaken, Aggregate could find it more difficult than we had expected to secure the refinancings of VIC and Fürst.

- Bonds are now below 50c/€, a price we consider backed by its three main assets alone. But we are not sure of the value in some of the obscure FREA assets and without those, bonds are pricing the three assets through the equity - no discount.

- We still believe in Aggregate’s assets, but the plot has unquestionably been thickening since we bought our piece. As per above, if Aggregate fail to find a buyer for the Fürst SSNs (which we think should be entirely possible), or even if its argument that the Adler SPV was not a “Material Subsidiary” fails, the bonds are in for a further drop.

- As a result we have to de-risk what has dropped to a 3% position by another 1% down to 2%. It pains us somewhat, but we have gotten the trade wrong so far and there has got to be some discipline. We are selling that position at 45c/€ to reflect what should be a hard-to-move asset on a Friday afternoon. We will gladly increase the position when we feel more confident again.

- This could be a difficult weekend for Aggregate.