Thu 11/05/2020 15:07 PM
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Relevant Documents:
2023 Notes OM
2024 Notes OM
Nov. 5 Release

Spanish ferry operator Naviera Armas could follow the path taken by Spanish groups Lecta and Codere, this year, and use an English law scheme of arrangement to implement a debt restructuring. Naviera is in a 30-day grace period ending Dec. 1. The group missed a €4.58 million interest payment, due Oct. 31 on its 2023 senior secured notes, according to a statementContinue reading for the EMEA Core Credit by Reorg team's coverage of  Naviera Armas's debt restructuring and request a trial to follow our coverage of thousands of other debt restructurings.

Naviera Armas did not reply to a request for comment.

The English scheme process could be used to implement any number of refinancing options including: (i) a debt for equity swap, (ii) the amendment of note documentation, or (iii) a complete cut of creditors’ claims.

Naviera Armas said it has started negotiations with a group of bondholders but talks are yet to formally begin, sources told Reorg. The bondholder group, advised by PJT Partners, has requested additional information about the company’s state of affairs, and is willing to negotiate.

The Spanish ferry operator got a €75 million facility from HPS and Apollo, secured on certain vessels within the restricted group and cargo receivables, to fund capex commitments and improve its liquidity. The company currently needs more liquidity and would have to secure a waiver from its bondholders to receive additional financial aid, since it cannot issue more secured debt without changing its indebtedness covenants, sources said.

Naviera Armas is working with Houlihan Lokey as financial advisor, as reported.

A scheme process could be used to completely wipe out the existing shareholders through the enforcement of the group’s topco share pledge, however given that the group’s management is controlled by the Armas family, this seems unlikely. A scheme does require support from the scheme company and its creditors.

It would be binding on all creditors if 75% in value and 50% in number in each class of creditor approve the proposal. The process is a company-led tool, so Naviera’s management will have to be supportive of a scheme.

Finding jurisdiction to use an English law scheme of arrangement is a well-trodden path. Even though Naviera is a Spanish incorporated company and its notes are governed by New York law, certain structural actions could be put in place to allow the English courts to find jurisdiction.

In the recent Lecta scheme of arrangement, the English courts found jurisdiction where the Spanish group had added an English co-obligor to its notes and also amended the governing law from New York law to English law. Naviera may, in theory, follow this precedent, but management and noteholders would have to be aligned for the process to work.

In the alternative, the group could attempt to obtain the consent of its noteholders to waive the payment event of default using a consent solicitation. Unless creditors receive a large incentive to waive the default, they are unlikely to consent without a deal in place.

Although waivers of interest payment defaults under the terms of the notes require the consent of 90% of noteholders, a rescission of acceleration of the notes can be made by the holders of a simple majority of notes and a waiver of the payment default that resulted from such acceleration.

Notably the group has about €3.19 million of interest payment due under its 2024 senior secured notes on Nov. 15 and is likely to miss this payment also. The group has not provided definitive guidance on the matter as yet.

Upon expiration of the grace period, absent a waiver from noteholders, 25% of holders could instruct the notes trustee to accelerate the secured notes and enforce their security.

The group’s secured noteholders and credit lenders benefit from security, both in the form of share pledges and mortgages over the group’s vessels. Enforcement on both may not be straightforward. The vessels may not be located in creditor friendly jurisdictions at the time of enforcement and the group’s sponsor is likely to resist any enforcement that takes the control of the company and business away from them and puts it into the hands of the creditors. More details on the issues the creditors may face with security enforcement can be found HERE.

The group may resort to using a Spanish enforcement process alongside a scheme to implement the restructuring, as described in Reorg’s legal analysis HERE.

The quarterly coupon payment under the group’s 2023 notes is about €4.58 million, payable on Jan. 31, April 30, July 31 and Oct. 31. The quarterly coupon payment under its 2024 notes is €3.19 million, payable on Feb. 15, May 15, Aug. 15, Nov. 15 respectively. The coupon on both floating rate notes is linked to Euribor and has a floor of zero.

Security Package

The security package notably includes a share pledge over the group’s topco, (Bahía De Las Isletas SL), five vessels, and share pledges over the guarantors. The notes are secured on a first-ranking basis by share pledges over all of the shares of the following entities:

  • Bahía de las Isletas

  • SL, Anarafe

  • Estudios y Consignaciones

  • SLU, Marítima de las Islas

  • SLU, Naviera de Jandía

  • SLU, Marítima de Barlovento

  • SLU, and Marítima de Sotavento

As well as this, there is security granted over 99.83% of the shares of the issuer. Notably, the group’s RCF lenders benefit from priority in enforcement to the holders of the notes under the terms of an intercreditor agreement.

The five vessels that secure the notes and the RCF are below:

Below is a list of owned unencumbered vessels of Naviera as of first quarter of 2019, some of which may have been used to give security to the €35 million delayed drawn HPS, Apollo facility thus decreasing the potential claim of bond holders on such unencumbered vessels.

The group’s corporate structure at the issuance of the 2024 notes is below:

(Click HERE to enlarge.)

The pro forma capital structure is below:

Naviera Armas (pro forma as of 09/30/2020)


EBITDA Multiple

(EUR in Millions)





€31M Super Senior Secured RCF 1



Total Super Senior Secured Debt



€300M Senior Secured FRNs 2024 2



E + 4.250%

€282M Senior Secured FRNs 2023 2



E + 6.500%

Total Senior Secured Notes



Secured €40M recievable facility 3


Secured Delayed draw Facility €35M 3


Total HPS, Apollo Secured Facility



€16.8M La Esfinge Loan 4



Total La Esfinge Loan



Deferred acquisition payment


Spanish RCF Lines (ICO Guarantee) 5


€30M 5Y ICO Loan 6




€5M 3Y ICO Loan 6




€5M 3Y ICO RCF 7




€5M New ICO Loans


Total Unsecured Debt



Other loans 8


Leases - IFRS 16


Total Other Debt



Total Debt



Less: Cash and Equivalents


Plus: Restricted Cash


Net Debt



Operating Metrics




RCF Commitments


Less: Drawn


Other Liquidity


Plus: Cash and Equivalents


Less: Restricted Cash


Total Liquidity


Credit Metrics

Gross Leverage


Net Leverage


Pro foma cash includes €11.7 million of cash as of H1'20 to which €5M of new ICO loans were added and an additional €5M was added from the increase in Spanish RCF lines after H1'20. Other liquidity includes €4.6M of undrawn bilateral RCF lines as of H1'20 with additional €75M of HPS, Apollo facility which was assumed to be undrawn of which €35M was for vessel improvements. LTM reported EBITDA is not pro forma for the synergies as these were not disclosed in H1'20 results.
1. RCF is super senior in enforcement as per the intercreditor agreement. Vesseal collateral includes first-ranking mortgages over Volcan de Tamasite, Volcan de Timanfaya, Volc an de Tijarafe, Volc an de Teide and Volc an de Tinamar. Also has share pledges over various entities of the group.
2. Vesseal collateral includes first-ranking mortgages over Volcan de Tamasite, Volcan de Timanfaya, Volc an de Tijarafe, Volc an de Teide and Volc an de Tinamar. Also has share pledges over various entities of the group.
3. Part of HPS and Apollo facility. Security over certain vessels and cargo receivables
4. The La Esfinge loan which has a total capacity of €16.8M is senior to notes with respect to the assets it secures which include mortgage over La Esfinge concession among others things. It matures on 2027-01. The amount drawn was assumed to be the same as the end of FY'19 due to the lack of disclosure in H1'20 report.
5. €12M of the Spanish RCF lines in H1'20 of which €4.6 were undrawn. These lines were increased to €17M following H1'20.
6. Grace period of 1 year. Management said rate was 3% on average.
7. RCF was assumed to drawn as this was not included in reported undrawn RCF amounts as of H1'20.
8. Residual amount of loans from the total €67M La Esfinge loan and other and €31.2M short loans after taking out the €12.2M la Esfinge loan, €30.4M deferred payment acquisition, ICO loans and €7.4M drawn Spanish RCF lines as of H1'20.
Pro forma: Capital structure is pro forma for the €75M HPS, Apollo facility, €5M of new ICO loans and increase in Spanish RCF lines to €17M from €12M following H1'20.

--Shan Qureshi, Luca Rossi, Noor Sehur, Laura Vilaça
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