Codere - further advisory fees, restructuring fees and new money fees likely to occur - but fundamentals??

All,

We have updated our model here.

We remain negative on the name but we are reluctant to short the bonds due to continued (unreasonable) support from creditors to the Company.

Not long since the restructuring last year, the Company are likely to need further financial assistance from creditors/shareholders as liquidity continues to tighten in H1 2021.

A further Facility will be required over the next 12 months to bridge the Working Capital outflow that will occur prior to the underlying business returning to its steady-state level. It is the method of this new money that is causing us concern given it is hot on the heels of the 2020 restructuring. Waivers will need to be obtained from the SSNs and the Super Senior Notes, with approval required at court level. In a post-Brexit world, which jurisdiction will be used it still open to debate, with potential hold-out value from refusal to waive likely to become greater value.

The "correct" restructuring should involve debt/equity swap but given the short timeframe and legal uncertainties, it is unlikely to be achieved. Away from the process of a restructuring, we continue to have concerns around the "steady-state" level, but even with the business returning to FY19 levels by FY22, this business is over-leveraged and will not be in a position to refinance the bond maturities in 2023.

We will continue to monitor the name.

Happy to discuss.

Tomás
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