Initiates negotiations with bondholder group; chooses to use grace period with regards to notes interest payment
“Hold” the NOVASP 9.625% at a mid price of 53 or a yield of 28.0%
Novasep announced that it reached an agreement with noteholders to formally enter into negotiations with regards to adjusting the company’s capital structure. Under the agreement, noteholders have decided to waive an event of default under the terms of the note if Novasep nominates a mandataire ad hoc under the French restructuring legislation. The appointment of a mandataire ad hoc is one of the routes under French pre-insolvency proceedings and basically aims to prevent bankruptcy. A representative to facilitate negotiations between the company and its creditors is appointed by the commercial court (usually the company suggests someone who then is approved by the court). The representative usually acts as a mediator between the parties but also advises the company with regards to its problems. The appointment as such does not trigger the suspension of creditors right per se. However, most creditors agree to waive their right to trigger an acceleration and this also seems to be the case for Novasep. Furthermore, Novasep decided to buy itself some time by making use of the 30 day grace period to progress further with talks on the financial restructuring. As we have previously highlighted, this should not come as a surprise and we believe it is a reasonable step for Novasep to enter into negotiations. Negotiations may well be challenging (as Novasep currently is owned by PE sponsor Gilde and management) and we would like to remind investors that French restructuring provisions are not favourable for financial creditors. In any case, we think a substantial haircut of Novasep’s debt (c. 50%) vs. granting equity to noteholders would be a reasonable solution to allow Novasep to grow the Process segment, which in our view is the main contributor to the company’s EV. We keep our “Very High Risk” on the LARA scale for now, but still do not believe the bonds offer much value given the high uncertainty involved.
“Hold” the NOVASP 9.625% at a mid price of 53 or a yield of 28.0%
Novasep announced that it reached an agreement with noteholders to formally enter into negotiations with regards to adjusting the company’s capital structure. Under the agreement, noteholders have decided to waive an event of default under the terms of the note if Novasep nominates a mandataire ad hoc under the French restructuring legislation. The appointment of a mandataire ad hoc is one of the routes under French pre-insolvency proceedings and basically aims to prevent bankruptcy. A representative to facilitate negotiations between the company and its creditors is appointed by the commercial court (usually the company suggests someone who then is approved by the court). The representative usually acts as a mediator between the parties but also advises the company with regards to its problems. The appointment as such does not trigger the suspension of creditors right per se. However, most creditors agree to waive their right to trigger an acceleration and this also seems to be the case for Novasep. Furthermore, Novasep decided to buy itself some time by making use of the 30 day grace period to progress further with talks on the financial restructuring. As we have previously highlighted, this should not come as a surprise and we believe it is a reasonable step for Novasep to enter into negotiations. Negotiations may well be challenging (as Novasep currently is owned by PE sponsor Gilde and management) and we would like to remind investors that French restructuring provisions are not favourable for financial creditors. In any case, we think a substantial haircut of Novasep’s debt (c. 50%) vs. granting equity to noteholders would be a reasonable solution to allow Novasep to grow the Process segment, which in our view is the main contributor to the company’s EV. We keep our “Very High Risk” on the LARA scale for now, but still do not believe the bonds offer much value given the high uncertainty involved.
