OHL - model update on quarterly cash flows and legacy projects

All, 

Please find our updated model here. 

OHL is making progress on its debt restructuring plan. Having secured approval of its negative pledge waiver request from bondholders at the second meeting on 4 September, the company is now in discussions with bondholders. The remaining disagreement, according to the Spanish press, concerns the size of the haircut for the bondholders, the amount of equity and equity instruments bondholders would get as compensation, and the potential new money injection from the Amodios.  

We have updated our model for estimates of quarterly cash flows. OHL’s reported quarterly cash flows, unlike its annual cash flows, are not fully reflective of true cash movements, as they instead reflect regulatory quantities. However, we estimated the quarterly cash flows by using a combination of bottom-up and peer comparison.  

We remain neutral on the OHL bonds at 50.  Following the most recent results and press reports about OHL, we have updated our sensitivity analysis to reflect the current state of the discussions. OHL managed to approve the negative pledge waiver during the 4 September meeting, and we therefore see probability of an orderly debt restructuring as having increased. We would therefore be inclined to be long the OHL bonds. However, we understand that trading in these bonds have reduced considerably as the restructuring discussions approach a final outcome. 

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

Juliano