Vivion – Waiting for the other shoe.
All,
Please find our updated analysis here.
The amend and extend operation in August resolved much of the pressure on Vivion over the 2024 bonds. The company needs to redeem the remaining €183m outstanding in August 2024. Vivion has various sources of liquidity, from selling UK hotel assets or raising bank debt secured on the hotels. Either way, it is unlikely that Vivion will walk away from €2.7bn of assets for the sake of €183m, particularly given the level of unencumbered assets in the portfolio.
Investment Considerations
- We are on the sidelines with Vivion for now. The 6.5% 28/29 bonds are trading above the 73c/€ we had as fair value at the time of the exchange. The €183m August 24s still outstanding trade at 92c/€.
- The August 24s have 8 points of Capital and 2 points of coupon, but Vivion has not yet put the liquidity in place to make this redemption. The downside here would be 20 points if there is a delay in Vivion arranging repayment.
- Vivion has substantially dealt with its maturity issues through an amend and extend operation. The company has sufficient net assets to repay the remaining €183m, through asset sales or bank debt. The Dayan family will not risk losing control of the Vivion assets for €183m
- Currently, assets cover debt, and our valuation is still around 7% below Vivion's. However, LTV is now c55% at the Vivion Investments SARL.
Vivion has options to refinance the remaining €183m 2024 bonds:
- Vivion still has €183m of August-2024 bonds, and how Vivion refinances them is the second shoe to drop in Vivion’s plans.
- The company has unencumbered hotel assets it could sell. The Hilton hotels in Vivion's portfolio were acquired for £246m (in 2019) and are unencumbered. Alternatively, the 26 Hallmark hotels were originally worth >£250m.
- Vivion could raise bank debt instead. A loan of £183m would equate to 37% LTV on the original valuations, and will not be cheap. The £200m loan from M&G was at <50% LTV and cost 8.7%. Bank debt would layer the bonds, but would push out maturities more in line with the extended bonds.
- Vivion could also extract more cash from Golden, but we would see this as the least likely. The Dayan family would not want to risk losing control of Golden but, if the alternative was losing control of Vivion, they would do it.
I look forward to discussing this with you all.
Aengus
T: +44 203 744 7055