RE: Hybrid bond down 15% as of 13:347 Oct 2025 09:47
All this BBVA report was on 1st July before the sale, and was all if's and buts with the following conclusions.
Based on Moody’s/Fitch’s recent reports, our calculations and not withstanding any unforeseeable actions that Mobico could take (e.g. equity injections),
we believe that Mobico is likely to do the following: Hold the proceeds from the sale (£215-230m) as cash and not immediately repay any outstanding debt (Fitch Jun25; “Management plans to retain the upfront cash proceeds to preserve financial flexibility while a portion of the funds will be used to repay any outstanding borrowings under its revolving credit facility”).
Mobico will redeem its debt as it comes due; the group has £234.3m of private placements maturing in 2027 with £396m in total maturing between 2027-32 (Moody’s, Jun25; “assuming completion of the sale of the North American school bus business, we anticipate that
Mobico will have sufficient cash on balance sheet to meet its 2027 debt maturities”). The group will not call its £500m hybrid (callable between Nov-25 and Feb-26) and will leave it outstanding; driven by both restrictions on its covenants and cash limitations (Moody’s Jun25; “we assume that these notes will remain in the capital structure, resulting in almost doubling interest expenses due to the notes' coupon step up
Other Potential Remedies (which challenge our Base-Case Scenario & Recommendations) Although our analysis and assumptions (based on the information that is currently available) leads us conclude that there will be negative fundamental and rating developments ahead for
Mobico, we believe there are also a number of remedies that could theoretically change the company’s future and its ability to confront its debt: Rights Issue Based on Mobico’s AGM (June 9th), we understand that
Mobico has authorization to issue shares up to a nominal value of c.£20m, which we estimate would raise around £100m of cash (based on a 20% discount offered vs. current share price). We believe that this would not prevent
Mobico breaching its leverage covenant threshold should the group call its £500m hybrid; we estimate this would increase net leverage from 2.7x to 3.9x (>3.5x threshold). Also, in this scenario,
Mobico’s cash balance would be significantly reduced to c.£27m, leaving little remaining buffer in case of further cash burn. However, there is some precedent here, as National Express undertook a £360m rights issue in November 2009 to strengthen its balance sheet.
So who knows what's going to happen.
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