Fitch likes visibility green power deal shines on Ellaktor bond

Ratings agency Fitch said that the potential sale of a 75% stake in the renewable energy sources (RES) business of construction company Ellaktor to Motor Oil (Hellas) Corinth Refineries S.A. (MOH) should allow the company to repay its 670 million euros 6.375% senior notes on or before their maturity in December 2024, despite the risk of the bond being called before the sale is completed.

Fitch estimates that the proceeds of the sale, combined with existing liquidity, should be sufficient to repay Ellaktor’s 670 million euro senior notes on or before their maturity in 2024, it said in a statement.

The sale of RES has been agreed between major shareholders Reggeborgh Invest B.V. (RBI; 30.52%) and MOH as part of a framework agreement when MOH acquired 29.87% of Ellaktor’s share in May 2022. The enterprise value for the RES business has been agreed at 1 billion euros on a debt-free-cash-free basis and normalised working capital, and will be subject to profitability-related adjustments. We understand from management that the due diligence process is underway, added the credit ratings agency.

The bond remains at risk of being called if the voluntary tender offer recently announced by RBI to buy out Ellaktor’s other existing shareholders at 1.75 euros apiece triggers a change-of-control event in the 670 million euro bond’s documentation before the RES sale is completed. This could represent liquidity stress for Ellaktor, but we believe that the risk is mitigated by a backstop facility provided by some Greek banks.

Although MOH has publicly stated that it will not participate in the tender, RBI may become the beneficial owner of more than 50% of total voting shares as a result of the tender offer and trigger a change-of-control event, requiring Ellaktor to purchase the notes at a price equal to 101% of the principal amount plus accrued and unpaid interest.

Once the RES sale is concluded and the bonds repaid, the new majority shareholder may decide to abolish the financing platform established by the restricted group. We would also expect the new majority shareholder to decide on a new capital structure for the reorganised business. Fitch will re-assess Ellaktor’s new business profile once more certainty on the execution process, details about the new capital structure and future strategy are available.

We understand that RBI has arranged the funds needed to proceed with the tender offer and it does not intend to upstream cash from Ellaktor to partially repay the funding.

Ellaktor is an infrastructure and construction group with a strong position in Greece. The transaction's restricted group consists of concessions (excluding the Moreas Motorway), renewables, and environment business. It excludes the construction and real estate business.