Maxeda : Chasing rainbows

Maxeda's Q2 earnings (period ended early August) are due out on 1 October. On that said date, the maturity of the 5.875% 01/10/2026 notes will become current, as there has been no early refinancing window to date. After two consecutive years (2023 and 2024) impacted by record rainy peak seasons (spring/summer), which led to a deterioration in EBITDA, credit metrics and ratings, the die seemed to be cast for the notes, and an Amend & Extend scenario appeared to be the most likely outcome. Moreover, several sources revealed that bondholders had hired Moelis and Weil as advisors and that Maxeda was working with Rothschild.
Since April, however, the outlook seems to have brightened somewhat for the group. After fluctuating between 70% and 85% for two years, the bond price has steadily rebounded to 94.5% ask (YTW: 10.8%). The name is benefiting from: 1/ a catch-up effect on its earnings thanks to a 2025 peak season that is at last favourable weather-wise; 2/ record high free cash flow helped by a strong working capital effect (digital transformation of the supply chain) and low capex; and 3/ bond buybacks on the market (€ 36m, i.e. 8% of the notes, announced to date). We think it more than likely that the upcoming release will again be favourable and lead to further reduction in leverage (to 3,7x pre-IFRS 16 / 4,2x IFRS 16 on our estimates).
With interest rates having also fallen significantly, will the group seek to access the bond market and refinance its debt at par, which was unthinkable just a few weeks ago? This still seems ambitious to us without further deleveraging measures.
However, as we have outlined in this report, the final treatment of the bond, although uncertain, could probably be less painful than initially anticipated given the improvement in credit metrics. Bondholders must currently decide whether they want to run the risk of being involved in a (decent) Amend & Extend process or prefer to sell down at c. 95%, depending on their entry point. We are raising our credit opinion to Stable and our recommendation to Neutral.