Haya - Stuck in no man's land
All,
We have updated our model here.
Haya’s quarterly numbers are a distraction from the main issue - retention of the Sareb contract - which we should find out about in early next year. Underlying performance was a mixed bag but it is all just tinkering at the edges while the uncertainty of the Sareb contract and refinancing of Nov 22 bonds remain outstanding.
Recent Results:
- Haya’s quarterly revenue was 10% lower than we had expected, explained by a mixture of higher management fee but lower volume transaction fees. EBITDA, at €14m was also lower than we expected.
- However, FCF was significantly better than we expected due primarily from Working Capital and specifically outstanding Trade Receivables. Company state that outstanding Trade Receivables has reduced to “normalised” levels of €59m, however, they have never been this low. In fact, Accounts Receivable has historically been c.€100m, or c.180 days. Over the last couple of quarters, Haya have been driving this down to current levels of c. 120 days.
- Haya confirmed the recent contract win, “Jaguar” portfolio, where Cerberus acquired a €500m face portfolio from Cajamar, is an existing portfolio so doesn’t change the overall assets under management as we suspected. However, we failed to account for the “success” and “transaction” fees that Haya will receive from Cajamar for this transaction, which will close in Q4 2021. So, although it has no impact on AUMs it will have a positive impact on P&L in Q4.
Sareb Contract:
- No update on the process from Haya management. As a recap, Sareb were seeking to reduce the number of providers they use to service their underlying portfolio, allowing greater economies of scale, enabling Sareb to drive down pricing. Haya has made it to the second phase and expect an answer in early Q1 2022. Haya expect a very competitive process and the outcome remains uncertain.
Refinancing:
- Haya are working on refinancing options but provided limited update on the call. Haya bondholders have organised, with reportedly >50% in the group, and have PJT and Latham & Watkins advising. Initial discussions were focusing on Amend & Extend but recent speculation is a partial repayment and refinancing.
- We still find it difficult to envisage a refinancing without clarity on the Sareb contract.
Investment Considerations:
- We have not taken a position due to the potential loss of contracts. The business remains cash generative and has substantial cash balances. However, the binary nature of the Sareb contract, which accounts for 10-15% of revenues (less on EBITDA basis) makes any investment difficult.
- Bonds are likely to see a significant drop on loss of Sareb contract and we would contemplate an investment at such time.
Happy to discuss.
Tomás
T: +44 20 3744 7009
M:+44 7786 705 806