Accentro - comment

For weeks the Ad Hoc bondholder group has been pushing Accentro to agree to a credible plan to restructure its balance sheet, and that has now emerged. As we expected the plan addresses the East Portfolio valuation black hole and with creditors taking control of the equity, there is some certainty of the plan being implemented. Given our structural concerns, we have been less confident about the bondholder position and we have already seen two failed restructurings, both of which we could see coming as soon as the agreements were signed. Governance at Accentro has been appalling as long as we have followed the name, so our immediate preference has always been for a comprehensive restructuring that puts creditors in control, even if it had to come with painful haircuts. We are preparing a model update, including how we think the capital structure will look and the impact on bondholders; we will publish this as soon as possible. 

Accentro has threatened a possible insolvency filing if the proposed sale of the  2029 bond to the Ad Hoc Group is not completed. Accentro is having an IDW S6 report prepared. The report is usually only appropriate if insolvency grounds are not already present. A stretch given the inability to pay the bond coupon.

The 2026 coupon was due today, but Accentro doesn’t have the cash (liquidity is in the low single digits). However, the Ad Hoc Group has offered funding for the coupon within the 30-day grace period. The Ad Hoc group proposal has painful haircuts for bondholders but offers control of the company and cashflows (through a 90% stake in the equity). 

Shinhan’s plan has not gone away, but it is dead in the water. The Shinhan proposal would leave the current equity in control and would require good faith from creditors that governance would improve.