Waterfall Analysis: Partial Redemption Coupled with A&E Likely Option to Address Pfleiderer 2026 SSNs; Sponsor New Money Needed as Support; Full Value Recovery Expected by Investors

Credit Research: Shenda Xu, Jason Iheuko Legal Research: Chetna Mistry Reporting: Rob Schach Relevant Documents: Waterfall/Cash Flow Model – Q1’24 (Excel Download) FY’23 & Q1’24 Presentation FY’23 & Q1’24 Earnings Call Transcript Q1’24 Financial Report 2026 SSNs Offering Memorandum German engineered wood products group Pfleiderer faces unfavorable timing to manage its 2026 maturities. Its earnings are currently at the lowest level over the last three years due to plummeting volumes on deteriorated new construction activities and less post-Covid refurbishment demand in Germany. With consequently deteriorated profitability and cash generation, leverage has reached unsustainably high levels and is expected to remain at its peak by the end of 2024 in our base case scenario, making a straight refinancing or A&E transaction in early 2025 difficult without sponsor support. With deteriorated enterprise valuation compared to the time at its bond issuance in 2021, current high net leverage at 6.1x adjusted EBITDA (8.5x adjusted EBITDA excluding benefits from energy trading) leaves an extremely thin equity cushion to creditors. Leverage reduction, thereby, becomes the key part of the maturity management. This can be achieved through tender offer or redemption funded by sponsor’s new money, or through a debt for equity swap, which is on[...]