Atenor Deep discount rights issue builds bigger safety cushion

Yesterday, Atenor provided details of its 160.8m planned rights issue which is expected to be approved by an EGM on 6/11 and to be finalised soon after. We welcome the decision to increase the size of the capital increase from a minimum of 62.0m to 133.5m. The capital increase will not only ease the short debt refinancing needs, but also improve the debt ratio which in turn lowers the cost of debt refinancing next year. The transaction also provides more flexibility to complete property sales in a paralyzed RE market. In this note, we simulate some possible outcomes and timeline of the transaction. We understand that the deep discount nature of the transaction demands a large cash injection from existing shareholders (4.3x5ps). A rational investor should subscribe or sell his rights as long as the share is trading above the issue price of 5 Euro. The rights will become worthless at the end of the subscription period ! A consortium of shareholders have underwritten the transaction for 133.5m or 83% of the targeted amount. In our base case calculation, the debt ratio (excl. cash) will decline from 72% to around 50% between 1H23 and 1H24 (all other things equal). We explain our assumptions in this note. The higher equity cushion is critical to continue to draw financing and avoids a fire-sale of the pipeline. We rate the shares an Accumulate and initiate a new price target of 18.0 Euro (pre-transaction). The share could remain volatile as investors adjust their position to prepare for the issue. A base-case post transaction target price would be +-7.0 Euro.