Haya - Reality of bargaining power confirmed

All,

Please find our unchanged analysis here.

Bondholders have a decision to make as Cinco Dias claim a Haya deal has been reached. Details are not finalised but appear to be an increase in coupon to 7% from 5.125% and extending maturities to 2025. Bondholders are likely to receive warrants or a minority equity stake of up to 5% to participate in the equity upside.

Disappointed:

- We are a little disappointed, on two fronts.

- Firstly, with €109m of cash on the balance sheet as of September, plus the €20m fee to be paid by Unicaja for the early termination of the Unicaja/Liberbank contract there was sufficient cash to make a partial paydown of the bonds as part of any extension. There is no reason for Haya to have significant cash balances.

- Secondly, we had expected bondholders to hold off on any agreement to amend and extend until clarity was reached on the Sareb contract. If the A&E is agreed prior to the conclusion of the Sareb contract negotiations, bondholders have no options in the scenario the Sareb contract is terminated.

Reality:

- We acknowledge the reality might be that the extension was to aid Haya’s negotiations with Sareb in achieving a contract extension. The uncertainty surrounding the upcoming November maturities might have clouded negotiations with Sareb.

Investment Considerations:

- We did not take a position in Haya bonds primarily on two issues - the uncertainty surrounding contracts (Sareb still outstanding and Liberbank contract was terminated) and the poor negotiation power bondholders had over Cerberus, the equity sponsor. Cerberus has maintained control (95% rumoured) for no new equity confirms our fears that Cerberus held all the power.

- What should bondholders do? - As we have stated they don’t have much bargaining power, and acceding to the Amend & Extend appears their only option.

Happy to discuss.

Tomás

E: tmannion@sarria.co.uk
T: +44 20 3744 7009

M:+44 7786 705 806