Selecta - comment

Selecta yesterday reported dreadful results. The thesis that the Olympics and football would drive revenues as the Germany Worldcup did back in 2006 did not play out in an age where Paris offices all too easily could close and have people wfh during the games. Moreover, the negative trend we were observing in the first half of the year has gathered pace and LfLs are falling rapidly now. We are being caught long and wrong in the Prefs and naturally, the market is offer-only. We are seeing offers around 25c/€ and we’ve just heard of a bid at €12c/€. We would hit that even if it hurts. If we were KKR, we would signal a great deal of reluctance before offering any more fresh cash, and the fall-back case of a creditor-led restructuring would wipe out the prefs, with value more likely breaking in the 2nd Liens - if they can stabilise the SSNs. In that vein, the creditor group is now splitting between SSNs and 2LNs as the former should remain whole, while the latter needs to consider its options with a KKR deal and without. Selecta is not a case of immediate cashflow problems and provided the RCF can be assured, the parties should have time to reach an agreement.