Member Info for HopelessValue

I am surprised that the share price isn’t reacting on this rns

Jg, what’s the break down again pls?

21% via European express…I believe 24-25% total

COSMENS ARE BACK!!!!

John, I think this is a fair assessment of the current NA situation…however, as most brokers mention, such an asset doesn’t come around all too often and a lot of private equity/infrastructure funds are sitting on record levels of dry powder…so let’s see…if they are unable to sell NA then a 1% margin increase would be enough to offset the higher hybrid costs…

The way I see it, a na sale above $1bn would be very positive and should immediately significantly boost the share price…if that doesn’t happen, we should be ok but it will take time as long as margins normalise over time

JC…creditors have no right to demand equity. There is no convertibility in any of the bonds…nor are we close to breaching the covenants unless we are in for a very nasty surprise…even during the very challenging last year we managed to have an covenant ratio of 3…given things are normalising a bit, this should come down this year with ebitda likely north of 400.

Biggest risk is the hybrid, but that’s at the end of 2025…good luck shorting this on the back of that

Does anyone have any insights into how the school contract bidding season is going?

The sp may indicate serious issues however the smart money is usually in bonds…and there is no indication of stress in mobicos 2032 bond…zspread currently trading at 284

Agreed, it’s financial engineering to improve leverage components. Also interest payments on hybrids can be pushed back and it’s less senior in the capital structure vs other bonds…hence a company has to pay a higher rate for them (usually 300-400bps)

Schmoky, they would lose the equity component and hence just be paying premium rates for a normal bond…this only happens in distress when a company has no other way of refinancing.

JG, why would they buy back the equity component…again…the equity component has nothing to do with convertibility or traditional equity as such…the equity like component is due to the fact that a hybrid doesn’t have a due date

https://wealthmanagement.bnpparibas/en/insights/news/7-questions-to-understand-corporate-hybrid-bonds.html

Smoky, as far as I am aware, there is no dilution on the back of the hybrid…it is not a convertible…if it was a convertible then the interest rate would be much lower to compensate for the optionality…it’s equity feature is due to the fact that a hybrid in theory doesn’t have a due date…however, it is usually bought back at its first call date.

No, they likely can’t as it would breach there 3.5x leverage covenant

Standard practice for hybrids is to restructure them post the call date…however you can reset them…which means that the interest rate will be reset based on current market rates etc…however, usually only companies in distress do this and it sends a very bad message to the market. Also as mentioned before…the hybrid will lose its equity component and will have the same impact on leverage as a normal bond

They can not extend the hybrid…if extended the hybrid loses its equity value…hybrids are usually just extended when a company is in distress and no other financing options are available…they would have the re-issue a new hybrid…likely with an interest rate between 10-11%

Nomad, I think part of the answer was in what you mentioned…a lower interest rate environment should support a higher bid…but more importantly they wanted things to normalise first…more drivers and higher fees during the 2024 school bidding season…which will result in more clarity and hopefully more attractive offers

Thanks WT.

Yes, I don’t disagree with you but not sure how much someone is willing to pay for it if the company is in urgent need to dispose an asset unless there is competition over it. That being said, I don’t understand how hfs see value in shorting the stock here…what are we missing that is obvious to them? Also, there is no reason for cosmen to have increased his stake unless he expects it to be worth more over time.

Your sum of parts looks inline with what HSBC stated in March…they had alsa at 1.5b, uk at 0.4b, NA at 1.1b.

Quiet frankly I would be more than happy with an offer around £1 at the moment…but I fear that this is wishful thinking

Qube is mainly a quant shop, so the short is likely momentum driven which makes sense given recent price action.

The problem I see is that we could indeed get whipped out or atleast diluted in case the NA sale doesn’t go as planned and ebitda doesn’t increase by a decent amount over the next year…however I think even then we will likely get the chance to get out around 25p…given current pessimism and price lvl the upside in my opinion is much greater in case of a positive outcome…however I tend to agree with most on here that until we get an indication of positive developments…our patience will be tested and the share price will likely head lower

The current enterprise value of mobico is still around 2bn if you account for the hybrid…1.2bn net debt + 500 hybrid + 300 market cap…

I think the premium for a hybrid over a senior bond is around 300-400bps…mobicos current zspread currently trades around 275 bps…so a mobico hybrid should be roughly 575-675bps over the prevailing government bond…so depending on the where the 5-10y trades at the time…10-11% sadly doesn’t seem unrealistic…hence hsbc expects mobico to use a good amount of the na sale proceeds on the hybrid