Bank: “Viaplay equity is worthless”
December 1, 2023
By Chris Forrester
Investment bank Jefferies, in a report for clients, says that Nordic streaming results Viaplay’s current equity value is “essentially written down to nil” and with the current equity “wiped out” it has rated Viaplay as “Underperform”.
“The execution risk of the plan is low. Management’s tone on the 7am (December 1st) UK call [on the company’s Q3] was downbeat but professional. The company looks forward to a brighter future, built upon a more sustainable strategy and capital structure,” says the bank’s report.
“After months of speculation and delayed launches, we finally learned the details of the company recapitalisation. Before turning to the details, it’s important to note that Viaplay admits that after a detailed strategic review and a number of deep self-help measures, that without this plan, the likely outcome would have been insolvency proceedings,” the bank adds.
There are four elements to the recapitalisation, says Jefferies. A SEK 4 billion equity injection (on which more below), a debt write-down (SEK 1.5 billion), a debt-for-equity swap (SEK 0.5 billion) and a negotiated amendment to various debt instruments. Execution risk looks low with all stakeholders involved in negotiations and committing irrevocables. In total, with the new capital injected (SEK 4 billion) and the debt written down (SEK 2 billion), Viaplay will, all else being equal, swing from Q3 2023 net debt of SEK 3.3 billion, to net cash. It’s important to note that the self-help measures include exits in the Baltics and Poland and a loss-making sale of the UK back to Premier Sports; Viaplay has quantified the cash cost of these exits at SEK 2.2 billion between 2024-28.
As to Viaplay’s trading, Jefferies says “Subscribers are in-line, net sales +2.2 per cent ahead and the EBIT loss (ex. ACI & IAC) of -SEK 321 million is +SEK 78 million ahead of company-consensus. (-SEK 399 million). Within the mix, Nordic subscribers were +1.4 per cent ahead, International down -3.3 per cent. Nordic net subscriber adds +74,000 QoQ (from -688,000 / +113,000 in Q3 / Q2 2023), International -41,000 (from -344,000 / +211,000 in Q3 / Q2 2023). Net sales organic growth continued to decelerate to +7 per cent (from +16 per cent in Q2).”