Steinhoff - That "Africa First" Sequence
All,
Please refer to our updated analysis here.
Why did we even build that Africa vs. Europe toggle? Financially, yesterday’s announcement is a drop in the ocean, but as had been clear all along, the Tekkie Town claimants were too small to move the needle and so good on them to have fought hard - for quite a bit extra in relative terms.
For the creditors, the announcement is very positive. Having found this agreement with Tekkie Town means that Steinhoff are now within touching distance of an S155 restructuring in SA, which would then pave the way for the grand settlement.
Updates:
- We have not yet updated the annual results for Pepco and will be updating those at a later stage.
- We have slightly adjusted the formulae in SFHG so that instruments cannot recover more than they are owed in total.
Trading prices:
- Steinhoff SEAG and SFHG loans yesterday continued trading along a pay-out scenario from Africa first.
- The news of a settlement with the claimants behind Tekkie Town make this scenario yet more likely.
- A mixed sequence or even Europe first would disproportionately favour the Luxfinco 1 A2s at the expense of the Luxfinco 2 A2s due to the former's smaller size.
Positioning:
- We retain our two large positions in each SFHG loan. We continue to see upside of 20% in both instruments, even as the Luxfinco 1 A2s remain at risk of equitisation in the end.
- We feel that another wave of Coronavirus is priced in, both in SA as well as in Europe and possibly in the US. Nevertheless, discount home-focused retailers are structurally benefiting from these trying times while ultimately remaining a reopening trade.
Please reach out to discuss,
Wolfgang
T: +44 203 744 7003