First Read: UPM-Kymmene OYJ "JV bridge funding secured" (Buy) Jones

研报英文原文证据摘录

First Read: UPM-Kymmene OYJ "JV bridge funding secured" (Buy) Jones

w UBS Cons.

formalised, comprising ~€600m of bridge debt (vs prev unspecified) and a €100m RCF. 12/26E 1.69 1.63

Cash flow terms are tighter, with dividends restricted until shareholder loans are repaid 12/27E 2.22 1.95

(vs no prior restriction). Overall, the revised terms shift from upfront cash to a more 12/28E 2.17 2.12

deferred structure (reducing near-term cash realisation). Valuation and ownership

remain unchanged, but the implied JV equity will be higher given lower cash payment to Andrew Jones

Analyst

the partners.

andrew-i.jones@ubs.com

+44-20-7901 6545

Our take: Positive if the deal proceeds but risks still remain

Zenande Meyiwa

We were sceptical on the initial structure (ie the two parent companies taking out cash

upfront, funded by asset level debt), so it is unsurprising that the revised terms reduce zenande.meyiwa@ubs.com

the cash payouts to the parents while deferring some of the payments through +44-20-7567 5474

shareholder loans. However, a firm commitment for the initial bridge loan is a positive

development, but longer-term funding will still need to be secured within 2 years of the

transaction closing. It is also not clear what would happen to the terms of the agreement

if the EU competition enquiry requires some asset disposals to gain approval, so the deal

still faces risks ahead of closing. However, upfront cash out and ring fencing the risks

around a structurally declining business would be positives and a JV structure would

likely accelerate much needed asset closures to help the EU GP market to return to

balance. We still view the JV as a positive for both UPM and Sappi if it proceeds.

Valuation: Buy, PT €27.6/sh (blended DCF/target multiples approach)