Beni Stabili : We recommend tendering the 2019 CB to the offer

Beni Stabili launched this morning a tender offer on all of its EUR 270m convertible bonds due 2019. The purchase price will be determined by means of a Modified Dutch Auction. We already know that it shoud stand between 109.5% and 110% (vs a closing price of c. 107% yesterday). The offer is expected to close at 4.30 pm, London time/ 5.30 pm, CET today. Note there is a clean-up call at par + accrued interest possible if less than 15% of the CBs remain outstanding. - The tender offer is part of the liability management strategy of Beni Stabili aimed at optimizing its financing sources in order to reduce its average cost of financing, while mitigating the potential dilution risk. - Based on: i/ a theoretical credit spread of 80 bp (i.e. the level where Beni Stabili 2019 straight bond trades), ii/ a current stock price of EUR 0.586 per share, iii/ a stock volatility of 27%, and iv/ a borrow cost of 50 bp, we calculate a theoretical price of c. 110% for Beni Stabili 2019 CB, which fits with the 109.5-110% range for the repurchase price (the final repurchase price range will be delta-adjusted). - We recommend tendering the bonds to the offer on the basis of: i/ a repurchase price that reflects the intrinsic spot valuation of the CB, ii/ a fairly valued stock in our view (current discount to NAV of 25% vs historical average slightly above 30%) and iii/ a too-high premium on the CB (22%) to amortize within 2 years (investors should rather recover this premium by tendering the bonds). - - >