Haya - the timing of it

All,

Please find our updated model here.

Has anything changed? While the timeframe surrounding the resolution of the Sareb contract has been extended, the fundamentals remain unchanged. The quarter delay should make little difference to bondholders with a maturity of Nov-22. In the meantime, focus will remain on the equity holder, Cerberus, and their willingness to address the capital structure provisionally prior to the Sareb contract being extended or not.

Bondholder hopes:

- We think Cerberus will do nothing with the cash on balance sheet until clarity on the Sareb contract early next year. There is an outside chance of attempting an A&E with a partial 10c repayment and higher coupon, but there is no coercion element to force bondholders. This shouldn’t be confused with bondholders having any relative bargaining power either. Cerberus are the largest customer from a revenue perspective (2nd largest AUMs) and any whiff of default is likely to cause cross default to the existing portfolio of contracts, leaving bondholders with an empty estate.

- The coercive element will grow the closer to maturity any transaction occurs. Until then, bondholders have little incentive of prolonging their commitments in the face of potential contract loss of that size.

Q2 Results & developments:

- Cash conversion was again high, but given an extra boost from lower receivables. This is ahead of our projections, but we would expect the level of receivables to increase again once transaction volume returns to pre Covid levels. During the pandemic, transactions fell, but receivables fell even faster. However, this is temporary and we therefore expect an outflow of Working Capital when we return to higher transactions in 2022.

- The size of the potential new Cerberus contract is small (€500m) compared to the overall AUMs and we are not convinced it is even additional. Haya already have exclusivity on all Cajamar’s contracts so question is are these assets already being managed by Haya and is it only a change of ownership that is occurring?

Investment Considerations:- We fail to get excited at current levels at the prospect of lending against a melting book that has a potential step-down ahead of it. The Company may gain new portfolios in 2022 as activity is likely to step in Spain post moratorium on property enforcements, but the binary Sareb outcome will come first.


Happy to discuss.

Tomás

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

M:+44 7786 705 806
www.sarria.co.uk