Kem One - Getting off the fence - Positioning

All,

Please find our unchanged analysis here.  

The recent turmoil in the markets has resulted in the Kem One bonds trading down 10 points from levels seen just after the confirmation of the new Draw Term Loan. The initial view was that the €200m size was sufficient to fund the next couple of years but the current economic uncertainty, we are starting to question this. 

Investment Rationale:

- We are taking a 2% short position in Kem One’s Senior Secured bonds at 65%. The timing of this trade may appear strange as we didn’t short the name at the end of March when the bonds were 10 points higher. However, on reflection, we see a strong possibility that Kem One will not be able to trade through the next 12 months without having to seek additional liquidity.  

- The business plan presented by the Company as part of the refinancing included a €75m EBITDA in FY25 improving to €133m and €196m in FY26 and FY27. However, the current uncertainty is likely to lead to a reduction in FY25 projections and the timing of any recovery.  

Timing:

- We expect Kem One to publish its Q4 and FY24 numbers before the end of April, where we expect a more cautious outlook will be presented. 

- This trade should be viewed in conjunction with us covering our short in Cerba. We wish to maintain a short position in the market and expect more near-term negatives for Kem One versus Cerba.  

Happy to discuss.

Tomás

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