Schaltbau’s Securitization Program – The Financing/Operating/Investing Financial Analysis Problem

The German transportation-focussed engineering company Schaltbau Holding AG went through a deep performance valley during the last years. With ca. 45 mio Euro cumulative operating losses between 2015 and 2018 the future of the company was strongly at risk. In 2018, however, the company seemed to have managed the operating turnaround with double-digit revenue growth rates and an adjusted operating margin of ca. 3% (after ca. 0.5% in 2017). While this margin is still far away from the old levels of 7%-9%, the company is definitely heading into the right direction operationally. For 2019, the big challenge is now the restructuring of the liability side of the balance sheet (amongst others a ca. 100 mio. Euro syndicated credit line has to be refinanced, which compares to a current market cap of 225 mio Euros).

In June 2019, Schaltbau announced that it has basically reached an agreement for a new syndicate loan facility amounting to 103 mio Euros. Additionally, the company plans to set up a receivables securitisation program worth ca. 35 mio Euros. While we do not know any more details about this securitization program we assume that it will attract some investor interest as securitization can be quite an attractive tool for investors in these days where interest rates are close to or even below zero for many investment alternatives. For equity analysts, however, securitisation programs are not always easy to be set into economic context as they combine a lot of financing, investing and operating characteristics which have to be properly separated and accounted for in the valuation models. Below we take the Schaltbau-example for some clarifications on what is necessary to tackle such programs from an analytical point of view.

 

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