Codere - ink not dry on Restructuring II, but will they need restructuring III

All,

We have updated our model on Codere post Q2 numbers here.

We are not taking at a position at current level. There is limited liquidity in the name, due to lock-up period. However, the structure is unsustainable, with a further restructuring likely in the future. Subject to liquidity, we are likely to re-examine the name.

The Company has agreed additional financing (€147m net of repayment of RCF) , plus extending the maturity of the existing bonds by 2 years. It is extremely difficult to restructure a balance sheet during the Covid-19 crisis, but the post refinancing balance sheet increases leverage and does not achieve any debt write-down. We had concerns prior to Covid-19 on the Company's leverage and CAPEX spending, including license renewals, and the new balance sheet does not eleviate this.

The Company has secured its near term future and will have c. €100m cash balances at Dec-20, but with the reversal of working capital and resumption of maintenance CAPEX this excess cash will not last long. The business is not sustainable at c.90% levels of 2019 revenue, unable to create positive cashflow, and it is difficult to imagine the business returning to 100% levels.

Happy to discuss.

Tomás