Isolux Corsan : Update on the capital structure

In this Special Comment, we provide an update of our analysis of Isolux’ capital structure post-restructuring, based on the additional information provided by the company during a conference call held on 16 January 2017 and a press report released on 30 January 2017. - All-in-all, we consider that the additional news is negative, apart from the recent revival of the sale process of the brownfield transmission lines in Brazil. In particular, we note that the debt post-restructuring is higher than we expected (owing to € 208m non-restructured debt at the level of EPC subsidiaries that was not clearly mentioned before in our view, plus the crystallisation of some contingent claims), the liquidity is tight (cash on balance sheet was € c. 225m at end-2016 based on preliminary figures and Isolux expects negative FCF in 2017) and new orders (€ 919m) were low in 2016. - We prefer to adopt a more cautious stance at this juncture, and a Reduce recommendation on the new debt instruments (Facilities B/C) that were distributed to unsecured debt holders on 30 December 2016 (vs. a Speculative Buy recommendation on the old 2021 notes). Isolux will report its 2016 results in March and provide guidance for 2017 at that time. - - >