High Yield Toolkit: Industrials & Services Weekly: GFLCN 28s/29s at OW and Long-dated to UW after CEO/Founder LBO reports

Research evidence excerpt

High Yield Toolkit: Industrials & Services Weekly: GFLCN 28s/29s at OW and Long-dated to UW after CEO/Founder LBO reports

reduces the amount of capital required to raise and increases the feasibility of a take-

private.

The large total amount of capital needed remains the principal risk

We believe the main barriers to any transaction being agreed are the ~C$24bn /

US$17bn of capital requirements and Secure Waste shareholder approval. The assumed

capital structure would also leave GFLCN with ~8.3x net total leverage and breakeven

FCF, potentially requiring a larger equity contribution or less aggressive financing

structure.

A full take-private is not the only potential outcome. Globe & Mail described the process

as a potential take-private or investment; a minority investment would be less negative

for bondholders than a debt-funded LBO, however we question if it would help GFLCN’s

equity.

HPS (& Others) could rollover equity reducing required financing needs

HPS holds 14.8mn PF voting / economic shares on an as-converted basis, equal to 2.7%

of PF voting stock and 3.3% of PF economics. Additional HPS or shareholder rollover

could reduce the new-equity requirement. The Poole family (former Waste Industries

CEO) controls 1.7% voting and 2.1% economic equity interest in GFLCN and could also

partially help close the equity funding gap.

The 2028/2029 bonds offer a clearer repayment and refinancing path

We prefer 2028s and the 2029s because they have less duration exposure to a more

levered private capital structure. As discussed above, if a transaction were to be agreed,

we assume the 2028s would be repaid as part of the transaction. If the 2029s remain

outstanding, they would become the nearest maturities and should benefit from a

clearer refinancing path.