Algeco - Initiation

Dear All

Please find our initiation of Algeco here.

We are not at this time committing to a position in Algeco. Our analysis suggests that Algeco have sufficient liquidity in place to weather the fall-out from Covid-19, but that debt levels become (long-run) unsustainable until EBITDA rises back up to 90% of pre-corona levels.  

Given the relatively assured liquidity of Algeco, we are considering a long position in the SSNs for their 9% running yield and EV protection. However, the timing feels early in this market. Alternatively, if our outlook darkens and a short on the SUNs is available, that could be funded with the larger, upside-capped, downside protected SSNs. The 50% risk to that trade would be supportive action from the shareholder, which would be more likely next year rather than this and may only be coming end of 2022.

We are looking forward to exchanging ideas on Algeco with you.