Deutsche Bank Markets Research Emerging Markets Company Date Bosnia-Herzegovina 15 January 2018 Serbia United Group Slovenia Vivek Khanna HY Corporate Credit Research Analyst Media, Cable & Satellite (+44) 20 754-72905 Telecommunications
[email protected] Chaitanya Terala, CFA Initiating with CreditSell on Fixed Rate Research Associate
[email protected] Notes, relative value not attractive Recommendation Summary We initiate on the €4.375% Sr. Sec ’22 and € 4.875% Sr Sec '24 with a CreditSell recommendation and on the € Sr Sec FRN ’23 with a CreditHold recommendation, on valuation grounds as we don’t believe a 3-4% return is attractive considering the acquisitive nature and FCF profile. We recognize that management has successfully integrated a number of acquisitions and has delivered on the identified synergies and we are confident they will deliver on Figure 1: Outstanding Issues the CME acquisition savings. While we recognize the asset cover, we don’t Instrument Px YTW Z-sprd Rec. believe the current price levels reflect the limited de-leveraging and see a few (ask) points of downside. €4.375% Sr Sec '22 104.5 2.7% 289 C-S Leverage levels higher on M&A and PIK push-down € Sr Sec FRN's '23 101.9 0.2% 23 C-H Leverage levels of 5.2x net debt / LHA EBITDA including synergies and 5.8x excluding synergies increased from c. 4.0x cash-pay leverage pre the €4.875% Sr Sec '24 104.75 3.7% 349 C-S Source: Deutsche Bank, Bloomberg Finance LP recapitalization. The increase was driven by the refinancing of the outstanding PIK note at the operating entity (+0.9x) and on the back of M&A.