Vivion - Colour on Adler/Aggregate
All,
Please refer to our unchanged analysis here.
Amid a lot of market confusion surrounding his deal with Aggregate, Amir Dayan understands his and Aggregate’s positions perfectly well and while he may not have opened all his cards, he didn’t have to. We sat down with Amir over a coffee in one of his London hotels - before Adler released their postponement of annual results. He holds some interesting views:
Fürst:
- He confirmed that Vivion have a put to Aggregate for the €350m -ish they still owe him and that he has a share pledge below Aggregate’s acquisition vehicle - somewhere above €900m of debt, which today mathematically reduces to €600m of net debt, because of the large cash balance from the WC and Interest facility on the fully financed project. Note however, that going forward that cash is to be spent on the development. Vivion also hold pledges on three other assets of Walcher that are not part of Aggregate - interesting.
- He has bids for €1.1bn and more, should the asset return to him. But Aggregate have those same bids.
- He is “almost certain” Aggregate will pay him. The €350m are the lion share of the first ranking piece including a Grundschuld security (better than mortgage in Germany). They are deeply value protected. So, yes Aggregate might struggle to refi that paper at the same conditions, but it’s a trophy asset and if it costs them an additional few %age points to refi, so be it.
- If Aggregate do default on him, he’d be happy to take the asset back, as the contracts are such that he would not owe Aggregate the repayment of the cash and securities they sent him. It would be a disaster for Aggregate. Under German law however, he would have to pay them any amount above the recovery of his own outstanding debt, so depending on which law is applied there is no upside for him to be aggressive.
- He did not say so, but he would consider a deal with them that allows time.
Aggregate:
- He does not know if Aggregate will blow up - 50/50.
- He agrees that at Aggregate Holdings the creditors would likely enter into a deal with Guenter Walcher (who does exist, after all) rather than pull the plug on themselves and go into an uncontrolled insolvency.
- He also agrees that, should Aggregate blow up, it would be for liquidity, not value. So provided liquidity can be found, he thinks creditors should recover par. Never mind that the fresh cash providers would walk off with the spoils and that Walcher would be looking to retain a stake. He is not a distressed investor. Still, interesting to see his take on value.
Adler:
- Amir thinks the best deal in German RE today (that was before the announcements this afternoon) would be a take-private of Adler. In his view, the public ownership exposes the company to too much noise.
- His family obviously knows the portfolio extremely well…. See former ownership.
- He sees a value for the shares at €28. We can’t quite get there (we see the value at €17) and neither can Bulwiengesa, but he is the big guy. It has to do with the average rental value of the apartments and how they are legally set up to allow for privatisation. That’s not a model that ADO are currently pursuing and so it is not in the valuation - he argues.
Positioning:
- We have not taken a position in Vivion as the bonds trade too tight.
- We do hold positions in Aggregate and Adler, where in the latter we bought shares today (see our earlier mail).
Please reach out to discuss,
Wolfgang
E: wfelix@sarria.co.uk
T: +44 203 744 7003