Dean Foods – High Debt Levels, Structural Headwinds and Increasing Competition - The End Game?

ASTALDI (AST IM) - Event-Driven Restructuring Play?

Astaldi SpA (Ast IM) – Thoughts Post the Results & Strategy Update – Part 1

Global Credit Insights

Sebastian Ashton, CFA

SAA Advisors

Event-Driven

Dean Foods 1Q19 results and conference call contained little to get excited about except for some evidence of cost reduction in the business. Very limited guidance was provided for the balance of FY2019. As such investors need to take a leap of faith that the turnaround strategy can be successfully executed, or a buyer is found for the business. Even if they do find a buyer, given the significant leverage caused by the decline in EBITDA, this may still be a negative outcome for both bond and equity investors. We reiterate our thesis as discussed in our previous note published on the 5 May 2019. Given Dean Food’s high debt levels relative to our business valuation combined with its poor margins and issues that management faces in turning the business around, in the absence of a business sale or significant asset disposals, we believe investors should avoid investing in the publicly traded debt at current market levels of ~50%. Our thesis is underpinned by this levels proximity to where we believe recovery value comes out in the event of a debt restructuring.

Dean Foods 1Q19 results and conference call contained little to get excited about except for some evidence of cost reduction in the business. Very limited guidance was provided for the balance of FY2019. As such investors need to take a leap of faith that the turnaround strategy can be successfully executed, or a buyer is found for the business. Even if they do find a buyer, given the significant leverage caused by the decline in EBITDA, this may still be a negative outcome for both bond and equity investors. We reiterate our thesis as discussed in our previous note published on the 5 May 2019. Given Dean Food’s high debt levels relative to our business valuation combined with its poor margins and issues that management faces in turning the business around, in the absence of a business sale or significant asset disposals, we believe investors should avoid investing in the publicly traded debt at current market levels of ~50%. Our thesis is underpinned by this levels proximity to where we believe recovery value comes out in the event of a debt restructuring.

Dean Foods – 1Q 2019 Results, Nothing to Get Excited About

Dean Foods Co

Dean Foods – 1Q 2019 Results, Nothing to Get Excited About