AlmaViva - Refinancing looming, but risk of further delay/loss of Railways contract remain

All,

We have updated our model post Q2 results on AlmaViva here.

Odds are that AlmaViva will prolong their full relationship with RFI (Italian Railways) late this year, in which case the bonds should trade to the inevitable subsequent refinancing.  With the 7.25% coupon and leverage back below 3.0x (Pre IFRS 16 EBITDA) the bonds appear cheap.  However at current levels, c.99%, the upside of 2-3 points, plus carry, does not compensate for the potential, albeit small, of AlmaViva losing some or all of its railway contracts.  

Away from the Railways contract, AlmaViva’s CRM Contracts with Telecommunication customers operated out of their Palermo site gathers significant attention, but we firmly believe it is overblown and the Company can withstand any loss of this contract.  In fact, clarity surrounding the situation would be of greater benefit than the one-off hit to cashflow. 

We remain on the sidelines given its current trading levels.

Happy to discuss.

Tomas