OHL - El Confidencial article on current state of the negotiations ahead of the results tomorrow

All,

A smaller haircut, as suggested by the El Confidencial article, could be positive for the bondholders of the group. While the EUR120m of EBITDA suggested for 2021 does not seem outlandish to us, the question remains where all parties see EBITDA and revenues beyond next year. In addition, we estimate that a solid capital structure going forward would require either a bigger capital injection than the EUR50m suggested, a partial repayment of the GVM loan to OHL (unlikely at this stage), or a release of the EUR140m cash collateral on the part of the banks, potentially in combination with the completion of the increase in the new state backed secured facility from the current EUR70m to its planned EUR140m.

This morning, El Confidencial published an article in Spanish where it discusses the latest speculation on the negotiations between the shareholders and the bondholders to restructure the debt while avoiding a Concurso. This is in advance of the Q2 20 results call, scheduled for tomorrow at 8:30am UK time.

The article states that the Amodios agreed to inject EUR50m of equity in exchange for a haircut on the bonds. The proposed haircut is put at either 25% or at a total writedown of bond outstanding of EUR200m (note that the two numbers do not square with each other). According to the article, the main point of contention is how much of the debt haircut would be compensated for with warrants for bondholders, as the Amodios naturally do not want to relinquish control of OHL to the bondholders.

In addition, the Amodios see EUR120m of EBITDA in 2021 as likely, with a net debt/EBITDA of around 3x, which is seen as sustainable. This would not include the repayment of the EUR120m of the debt that Grupo Villar Mir owes OHL, which is scheduled to be repaid in September 2020 but is more likely to be postponed, according to the article.

In our estimates, that would be consistent with a recovery of around 60% for the bonds.

Please find our model and files on OHL, including our sensitivity analysis on the potential restructuring scenarios, here.

We are looking forward to exchanging ideas on OHL with you.

Juliano