WFS – new PSP cash and European timing
All,
Please refer to our unchanged analysis on WFS here.
We have been estimating that WFS require approx. E100m of additional liquidity this year to fund WC expansion linked to a recovery of its operations.
Additional US funding:
- In that context, the company has received $50.6m in February in form of further PSP funding in its US subsidiary, $14m of which in form of Promissory note and the remainder as grant. WFS Inc. further expect to receive $22.8m in due course, predominantly in form of grant. Since June 2020,
- WFS now have so far received $157.6m in PSP funding, of which $113.2m in form of grant and only $44.5m in form of promissory notes, ranking as sr. unsecured obligations of the US subsidiary.
Remaining liquidity need:
- These additional $70m+ narrow our estimated liquidity need considerably. Under the US Treasury’s PSP program, this cash is restricted in the sense that it can only be used to pay the employees of WFS Inc. and subsidiaries. The cash can therefore not directly be used elsewhere in the group.
- US operations account for 44% of revenues but are holding up better than in Europe. For lack of more precise data, we think it safe to assume a remaining liquidity need in Europe of approx. E50m.
Timing:
- To an extent, the US funds are buying more time for the company to find a liquidity solution for the other units. Because treasury funds are held in Europe and the US subsidiary now needs less funding, we think a global solution to WFS liquidity needs may have time until H221.
Options:
- Senior baskets are exhausted, which leaves either a cash injection jr. to the bonds or a solution involving the bonds consent.
- One apparent option includes Cerberus injecting the required cash in form of fresh equity.
- Bonds trading at 95c/E imply a readiness to accept a solution. Their rating of B- would also allow any CLOs to recommit their exposures.
As always, feel free to reach out if you want to exchange ideas on WFS.
Juliano
T: +44 203 744 7055