Europcar - Conclusions

All,

Please refer to our unchanged analysis here.

Europcar’s announcement yesterday draws the final conclusion under the idea that VW might buy in after all or that another deal could be engineered.

Portfolio Management:

From a portfolio management perspective Europcar has admittedly not been a success. We failed to lock into some of the gains when the name traded up 30 points before summer. Then once the primary thesis of avoiding restructuring began to fizzle in the last quarterly update, we should have taken more off before settling into any new thesis. As it stands we are now marking a loss on the position. As per end of August we were considering selling our position, but we got side-tracked and didn’t do it.

In recognition of the above and at the risk of selling at a low point (unlikely, given the weak negotiating position and possibly Sauvegarde process ahead), we will exit our position in the coming days at the best price we can get. 

Outlook:

Fundamentally, we see the bonds carrying some 55c/E and more, but multiplying our projections with a 5x forward EBITDA distressed multiple (very low for this kind of business, but very likely applied by the market) the bonds should successively trade down into the mid 30s.

We may re-enter the name again at a later date / a lower price.

Wolfgang