Takko, Tui, eDreams - and the postponed MPK
All,
While we are building an all-new, simpler model of Takko, we continue to monitor the situation in Berlin.
The pandemic is highlighting the limits of Germany’s consensus-based federal system - not unlike elsewhere in the US or Brazil. The urgently planned Conference of Minister Presidents (MPK) on Monday has been cancelled, for lack of a concrete plan that the federal government wants to push for. The country’s response to the virus is a patchwork of very diverse restrictions that differ materially from state to state. This not only erodes public confidence but also makes it very difficult to apply any “emergency break” to public life in the face of rising reinfection rates.
The background to the cancellation is that state presidents (MPs) are largely united in their view that "something needs to happen", but are divided on “what”. That answer needs to be provided in form of a concrete plan from the federal office and that apparently is taking some more time.
So the conclusion is:
- The cancellation is a mere postponement and the return to a harder lock-down will come. Maybe the conference will be held later next week, or more likely the week thereafter. Another complication in recent days has been that the re-infection rate calculations have been distorted over the Easter break and the actual run-rate should turn out to be far higher than recent calculations. So a week of extra time should highlight more urgency and make a deal more likely.
- Retailers like Takko should have an extra week or two to flush in some cash (mostly only 1 customer for every 40 m2) before likely facing further challenges to their business.
- Travel companies like Tui - out with a new convert - and eDreams could face renewed international travel restrictions. Recently the flourishing segment of Germany-Spanish Islands has been the only highlight in the sector and that would likely revert.
Takko:
As per recent notes, Takko’s most liquidity forecast suggests that another lock-down should require yet further injections, which may as well come for a last time, or finally force a restructuring. We, therefore, remain short Takko.
eDreams:
We still hold a small position in eDreams bonds, having sold the equity after it popped last year (clearly a mistake). In contrast to Takko however, these bonds are deeply value protected and we are holding on for the time being. Yields have come down considerably in the market and we see a chance these bonds may be refinanced before their time when cash has returned by way of negative NWC.
We have heard of some accounts finding enough borrow on Takko while others can’t. Please reach out.
Wolfgang
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E: wfelix@sarria.co.uk
T: +44 203 744 7003