Steinhoff - looking to take a position again

All,

Please find attached our updated in-depth analysis of Steinhoff here.

Perhaps the prices we are seeing are stale, but according to our entity priority model, the below two tranches are way off - both in part due to the premium the market puts on the guarantee from the NV. 

B2s:

We see the B2s only some 11 points behind the A2s, which is effectively the value of the NV guarantee. To the extent the market believes the guarantee should be more valuable, then the A2s are trading low.

With events unfolding at Pepco over the next weeks, we think the B2 should trade some 20 points higher than we see them quoted (again we do not have an actual offer and the tranche is small). 

One of the reasons the B2s are quoted low may be the fear that the LSW claim is slipping ahead of and pari to them in Luxco 2, participating in the Pepco bonanza. But if so, that should free up value from Conforama. In that context it would be good to learn a little more about how well that turnaround is going. The plan was based on a mass lay-off of 1,900 employees under Conciliation, so the bulk of it should be reasonably straight forward, compared with other restructurings.

23s:

The 23s are effectively the junior equity of Steinhoff. In our minds those should trade some 10 points lower. The reason is again that the guarantee from NV is unlikely to be worth 20 cents+. However, with the 23s we are not seeing a short term trigger at present and they may simply enjoy an extra bid for representing the purest form of upside.

As a result we would - f if prices can be confirmed - take a 5% of NAV position in the admittedly small B2s.

Wolfgang