Article/Intelligence
Restructuring/Waterfall Analysis: Selecta
Credit Research: Charlie Ward, Mengdi Zhang, CFA Legal Research: Chetna Mistry Relevant Items: Cash Flow/Waterfall Model September 2020 Noteholder Presentation October 2021 Cash Flow Model and Waterfall Analysis Form of First Lien Notes due 2026 Form of Second Lien Notes due 2026 Swiss vending machine operator Selecta is under pressure to tackle the 2026 maturity of its reinstated first and second lien secured notes, amid consistent cash burn and an unsustainable cash interest burden. An equity contribution could help smooth refinancing prospects. However, given sponsor KKR’s investment totals €954 million to date according to Reorg’s estimates, with no dividends taken, shareholder commitment is tentative. Reorg previously reported that KKR could seek an exit via a sale or an IPO before 2026. However, due to Selecta’s continuous cash burn and ongoing turnaround efforts, Reorg believes that a refinancing ahead of the 2026 maturities would be challenging given that interest rates are unlikely to return to historically low levels and the company’s current cash generation levels would not support a higher interest burden that the market would demand. Lastly, the first and second lien notes are rated Caa1 and Caa3, respectively and we have not seen a refinancing at this credit rating[...]