Sarens
New Coverage: Sarens' €250M Notes Drop to Mid-70s; Senior Facility Headroom Tightens; Negative €53.1M Free Operating Cash Flow
Fri 01/18/2019 08:14 AM
Relevant Documents:
Annual Report 2017
Q1 Presentation
Q1 Financial Statement
Q2 Presentation
Q2 Financial Statement
Q3 Presentation
Q3 Financial Statement
2015/2022 final OM
Belgian heavy lifting products manufacturer Sarens’ €250 million bond, paying a 5.125% coupon due 2022 has dropped to about 75 from about 90 at the beginning of December and from par in October. The subordinated notes are yielding 16%. The company said it had been suffering from underperformance in its Oceania and decided to discontinue operations in Australia through a controlled wind-down, management said in its third-quarter results.
The company said in the earnings presentation that it is in discussions with senior lenders to amend and extend existing facilities. It is seeking to renegotiate covenant headroom on its year-end test, sources said. As of Sept. 30, the company had the following headroom under its committed senior facilities, according to the third-quarter presentation:
Net debt was €730.5 million at the end of the third quarter and adjusted net leverage reached 5.5x while adjusted net senior debt leverage was 3.62x. The company initially raised €125 million in a bond in 2015 and it increased it to €250 million in the autumn of 2016 “to strengthen the company’s capital structure.”
Investors are concerned over capex spend and persistent negative free operating cash flow, which reached negative €53.1 million in the first three quarters of 2018, sources said. The company is working on a large-scale project called TCO, which requires a lot of front loaded capex.
The company’s turnover increased 3.3% year over year to €434.1 million in the nine months of the year. EBITDA improved to €87.5 million in the first nine months of the year compared with €85.3 million, while cash flow from operating activities amounted to €65.4 million, down from €80 million a year earlier. EBITDA margins saw a slight improvement to 20.2% in the first nine months of the year, up from 19.4%, but fell to 15.9% in the third quarter.
Cash and cash equivalents fell to €18.1 million as of Sept. 30, 2018, from €60.1 million a year earlier. The company said this was because of a negative impact of delayed invoicing at the TCO project, which has since been resolved. Capex (PP&E) increased year over year to €112.1 million in the first three quarters of 2018, compared with €54.5 million. A summary of the key financials is below:
The group’s capital structure is below:
S&P downgraded the company on Dec. 14 to B on weak performance, while the rating of the €250 million notes was downgraded to B+ from BB-.
The company’s TCO project, which is the largest in the company’s history, has not boosted earnings to meet investors expectations.
Management said there are still delays in project start dates in its key markets and it is focusing on capex reduction and making an abstraction of growth investments on TCO and Hinkley Point.
In 2017, the company achieved EBITDA of €116.8 million, which was 10% lower than a year earlier. Cash flow from operating activities rose 5.5% to €115.18 million. The EBITDA margin declined to 19.4% from 23.2%. The company suffered an €8 million negative currency fluctuation of €8 million.
The 2022 senior notes were issued on Feb. 5, 2015, by Sarens Finance Co. NV and are governed by New York law. The subordination agreement is governed by English law.
Under the terms of the bond indenture, consent from at least a majority of the notes is required for general amendments, with not less than 90% consent required for an amendment or waiver of money terms including the release of guarantees and security interests. To the extent that the Belgian Companies Code applies, reserved matters (essentially, certain of the money terms) may only be sanctioned by an extraordinary resolution passed by holders holding or representing not less than 75% of the notes.
Debt Explained, Reorg’s sister company, analyzed Saren’s bond offering memorandum at the time of issuance, and a full report is available HERE.
The company’s corporate legal structure is below:
Annual Report 2017
Q1 Presentation
Q1 Financial Statement
Q2 Presentation
Q2 Financial Statement
Q3 Presentation
Q3 Financial Statement
2015/2022 final OM
Belgian heavy lifting products manufacturer Sarens’ €250 million bond, paying a 5.125% coupon due 2022 has dropped to about 75 from about 90 at the beginning of December and from par in October. The subordinated notes are yielding 16%. The company said it had been suffering from underperformance in its Oceania and decided to discontinue operations in Australia through a controlled wind-down, management said in its third-quarter results.
The company said in the earnings presentation that it is in discussions with senior lenders to amend and extend existing facilities. It is seeking to renegotiate covenant headroom on its year-end test, sources said. As of Sept. 30, the company had the following headroom under its committed senior facilities, according to the third-quarter presentation:
Net debt was €730.5 million at the end of the third quarter and adjusted net leverage reached 5.5x while adjusted net senior debt leverage was 3.62x. The company initially raised €125 million in a bond in 2015 and it increased it to €250 million in the autumn of 2016 “to strengthen the company’s capital structure.”
Investors are concerned over capex spend and persistent negative free operating cash flow, which reached negative €53.1 million in the first three quarters of 2018, sources said. The company is working on a large-scale project called TCO, which requires a lot of front loaded capex.
The company’s turnover increased 3.3% year over year to €434.1 million in the nine months of the year. EBITDA improved to €87.5 million in the first nine months of the year compared with €85.3 million, while cash flow from operating activities amounted to €65.4 million, down from €80 million a year earlier. EBITDA margins saw a slight improvement to 20.2% in the first nine months of the year, up from 19.4%, but fell to 15.9% in the third quarter.
Cash and cash equivalents fell to €18.1 million as of Sept. 30, 2018, from €60.1 million a year earlier. The company said this was because of a negative impact of delayed invoicing at the TCO project, which has since been resolved. Capex (PP&E) increased year over year to €112.1 million in the first three quarters of 2018, compared with €54.5 million. A summary of the key financials is below:
The group’s capital structure is below:
S&P downgraded the company on Dec. 14 to B on weak performance, while the rating of the €250 million notes was downgraded to B+ from BB-.
The company’s TCO project, which is the largest in the company’s history, has not boosted earnings to meet investors expectations.
Management said there are still delays in project start dates in its key markets and it is focusing on capex reduction and making an abstraction of growth investments on TCO and Hinkley Point.
In 2017, the company achieved EBITDA of €116.8 million, which was 10% lower than a year earlier. Cash flow from operating activities rose 5.5% to €115.18 million. The EBITDA margin declined to 19.4% from 23.2%. The company suffered an €8 million negative currency fluctuation of €8 million.
The 2022 senior notes were issued on Feb. 5, 2015, by Sarens Finance Co. NV and are governed by New York law. The subordination agreement is governed by English law.
Under the terms of the bond indenture, consent from at least a majority of the notes is required for general amendments, with not less than 90% consent required for an amendment or waiver of money terms including the release of guarantees and security interests. To the extent that the Belgian Companies Code applies, reserved matters (essentially, certain of the money terms) may only be sanctioned by an extraordinary resolution passed by holders holding or representing not less than 75% of the notes.
Debt Explained, Reorg’s sister company, analyzed Saren’s bond offering memorandum at the time of issuance, and a full report is available HERE.
The company’s corporate legal structure is below:
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