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Pro-Gest: Liquidity Likely Ok. If Not, Expect M&A.

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    Company Profile

  • 179 Pages
  • October 2019
  • Everest Research Group
  • ID: 5131099
Why Read?

  • Understand why Pro-Gest’s liquidity is likely stronger than market participants believe
  • Understand why Pro-Gest is likely to be a desired M&A target and its market-implied 3.5x EV / 2019E Adj EBITDA provides significant bondholder upside vs peers on 8.6x
  • Clear up market confusion on recent events - Mantua plant authorization; uncommitted working capital credit facilities
  • Understand potential maintenance covenant breaches (triggers at Cartiere Villa Lagarina solo, Pro-Gest SpA solo and Pro-Gest consolidated), cross-acceleration and cross-default
  • Understand many scenarios regarding: Mantua plant authorization; magnitude and timing of final anti-trust fine; availability of uncommitted working capital credit facilities or equivalent new receivables factoring facility; revenue & EBITDA contraction potential vs 2006 - 2009 downturn given increased supply and adverse cycle; shocks to days payable outstanding, days receivable outstanding and days inventory outstanding
  • Understand importance of looking at Cartiere Villa Lagarina solo (Italian-language) financial statements and analysis thereof
  • Understand Italian local press - key issues in Mantua plant authorization; potential sale of Mantua plant
  • Understand Italian law restructuring options to deal with Pro-Gest should it need to restructure
  • Understand key drivers in recovery analysis and why base and bear case recoveries both come out higher than current trading levels

What’s New?

  • Detailed liquidity (and full financial) analysis with sensitivities to: Mantua plant authorization; magnitude and timing of final anti-trust fine; availability of uncommitted working capital credit facilities or equivalent new receivables factoring facility; revenue & EBITDA contraction potential vs 2006 - 2009 downturn given increased supply and adverse cycle; shocks to days payable outstanding (DPO), days sales outstanding (DSO) and days inventory outstanding (DIO)
  • Analysis of why Pro-Gest is likely a desirable M&A target - market leadership in structurally growing Italian market; highest EBITDA margins amongst European peer group; competitive advantage of wide local production footprint
  • Analysis of Cartiere Villa Lagarina solo financial statements

Questions Answered

  • Under what circumstances and when would liquidity break?
  • What is the recovery range on Pro-Gest’s 3.25% 2024 senior unsecured bonds across our full range of scenarios and sensitivities?
  • How would a debt restructuring work for Pro-Gest under Italian law? Art. 67, Art. 182-bis; Art. 161
  • How deep was the 2006 - 2009 downturn in European containerboard and corrugated board and packaging and how do our base and bear cases compare with this?
  • What is the outlook for the demand-supply balance in the Italian containerboard market?
  • What is the potential realizable value for the Mantua plant if the project is abandoned?
  • How has Pro-Gest compared with peers over time? Revenue growth; EBITDA margin; DPO, DSO and DIO; capex; ROIC; FCF; leverage; valuation multiples
  • What are the key points from Pro-Gest’s various bond, mini-bond and credit facility indentures to be aware of?
  • What are the key catalysts and dates for these?
  • What exactly are the key issues of contention around the Mantua plant’s Integrated Environmental Authorization application?

Table of Contents

  • View, Variant Perception & Recommendations
  • Business Overview
  • Industry Overview
  • Group Structure & Capitalization
  • Historic Financial Analysis
  • Trading Update – ER Q319
  • Trading Update
  • Forecasts – Base Case
  • Forecasts – Bear Case
  • M&A And Comparable Transactions
  • Liquidity & Restructuring
  • Investment Considerations
  • Appendix

Companies Mentioned

  • Pro-Gest
  • Smurfit Kappa
  • DS Smith
  • Mondi
  • Stora Enso
  • Metsa Board