Bonds Daily. ABGSC Daily Report - Bonds. Credit Research - 30 November :32 CET

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1 Credit Research - 30 November :32 CET Bonds Daily ABGSC Daily Report - Bonds Seagull Q3: Quarterly figures overshadowed by inbound interest to acquire the Company Revenues came in at NOK 40m, 11% above our NOK 36m estimate. EBITDA came in at NOK 7.8m, 37% below our NOK 12.3m estimate. Mind that there is a strong seasonality in Seagull and that about 50% of the annual revenues and 80% of annual EBITDA will be recognised in Q4. In terms of YoY movements the revenues was actually up 11% and the EBTIDA was up 24% which highlights that the underlying development, even though it deviates from our estimate, seems to be strong. Interestingly, in the Q3 report Seagull announced that In response to inbound interest to acquire the Company from a number of parties, the Board of Directors has initiated a process to evaluate strategic options for the Seagull Group, which may result in a sale of parts or all of the assets or share capital of the Group. At this point in time, no deal is signed, but for bondholders it is worth having in mind that the bond is make-whole until Jan 2020 and then callable at 104. A make-whole gives a bond price of just above 110. However, under a change of control the new owner can be accepted as a Permitted Transferee by a 50% majority of bondholders. ABG Sundal Collier is engaged by the shareholders in Seagull Group to advice in the strategic review. Mølleparken 4: Q3 - several new contracts LTV of 50.51% The company reported rental income of NOK 6.7m (-13% vs. ABGSCe of NOK 7.7m), while net rental income was NOK 4.3m (vs. ABGSCe of NOK 6.6m). Mølleparken was active in terms of new contracts during Q3: First, its largest tenant, Noroff Education, signed a new lease contract for additional 817sqm (expiry 30 June 2027). Second, Arbeids og Velferdsetaten has signed a short-term contract for 436 sqm that expires in 31 December Third, Wallman contacted the landlord with respect to extend their lease for an additional 10 years. Fourth, Storytel has asked to rent additional 155 sqm. For the latter two, the company expects to have closed the contracts by year-end. Moreover, LTV was 50.51% and cash balance stood at NOK (compared to covenant of NOK 3m). There was no news regarding the announced acquisition by Ragde Eiendom AS. ABG Sundal Collier is engaged by Mølleparken 4 Senior BondCo AS to explore the possibility to agree certain amendments in the bond terms. Höegh LNG: Credit triggers imminent HLNG 2020s look attractive While no new FSRU contracts were announced during Q3, HLNG is now in exclusive negotiations for two FSRU projects and in the final selection round for another two. On the conference call, we got the impression that the company was very confident regarding its exclusive negotiations, with Mr. Støhle (CEO) stating these contracts are exclusive. We have been selected. We have agreed the main terms. And we will announce these contracts, when they are completed and signed. Out of HLNG s fleet of seven ships, two FSRUs are currently trading on shorter-term contracts and the two newbuilds are Stock market Today 1D 1M 3M YTD OSE % -2% -6% 6% SBX % 0% -9% 1% OSX % -10% -26% -31% VIX % -20% 46% 105% High Yield Indices (Spread) Itraxx Xover 5Y 344 0bp 41bp 43bp 115bp HYG US 421 4bp 28bp 69bp 72bp ABG HY index 480 1bp 32bp 12bp 14bp BUHYEN 420-1bp 39bp 81bp 84bp Interest Rates Basis points NIBOR 3M 120 0bp 6bp 17bp 40bp NIBOR 3Y SWAP 168-2bp -6bp 7bp 41bp NIBOR 5Y SWAP 189-3bp -7bp 6bp 37bp US L3M 271 0bp 17bp 39bp 101bp US LIBOR 3Y SWAP 298-1bp -11bp 12bp 78bp US LIBOR 5Y SWAP 298-2bp -13bp 10bp 70bp Currencies USD/NOK % 1% 2% 5% EUR/NOK % 2% 0% 0% SEK/NOK % 3% 3% -5% Commodities Oil - Brent (USD/bl) % -22% -23% -12% Shipping Rates Baltic Dry Bulk 1,281-4% -15% n.a. 2% Baltic Tank (Dirty) 1,135 0% -1% n.a. 66% Baltic Tank (Clean) 780 4% 38% n.a. 19% Source: Bloomberg Jan-17 5-Feb-17 5-Mar-17 5-Apr-17 5-May-17 Source: ABG Sundal Collier ABGSC Credit Research ABGSC HY Index 5-Jun-17 5-Jul-17 5-Aug-17 Alexander Jost alexander.jost@abgsc.no Haakon Amundsen haakon.amundsen@abgsc.no Rikard M. Braaten rikard.braaten@abgsc.no Andreas Johannessen andreas.johannessen@abgsc.no Eric Wahlström eric.w ahlstrom@abgsc.se 5-Sep-17 5-Oct-17 5-Nov-17 5-Dec-17 5-Jan-18 5-Feb-18 5-Mar-18 5-Apr-18 5-May-18 Please refer to important disclosures at the end of this report

2 without longer-term employment. As such, firming up these contracts would be a clear credit trigger with the potential to completely de-risk the shorter dated bond maturity. With the (re)financing of Höegh Gallant and Grace completed, and a confident HLNG with regards to new contract awards, HLNG 2020s look like a highly attractive short-term trade, which we believe can tighten up to +250 STW (103.4%). With the offer side currently ~101%, we recommend to lift it. Read our full report here. Compactor Q3: Debt to VAE at 9% Based on data from holdings, the company has SEK 8,273m in share value, which translates to our value adjusted equity for Compactor, while GAV is SEK 8,384m adjusted for the cash position and dividend. During the period, we note that the company has made some acquisitions of H&M (+SEK 7m), FastPartner (+SEK 6m) and Oriflame (+SEK 22m) shares. With SEK 729m in debt in the holding company, Compactor s debt/vae is currently 9% while debt/gav also is 9%. FastPartner still dominates the total portfolio (SEK 7,551m), while SBB (SEK 507m) is the second largest investment. Oriflame, H&M and SAS accounted for SEK 215m. The company also announced that it has received SEK 93.8m in dividends after the period end. For the complete report, please follow this link. MPC Q3: EBITDA expectations on higher cost MPC Container Ships (parent company) reported TCE revenues of USD 48.8m (+ 0.9% vs. cons. of USD 48.4m), while EBITDA came in at 14.6m (-11.7% vs. cons. of USD 16.5m). Operational cash flow was USD 2.2m and cash balance USD 67.7m at quarter end. The bond-issuer (MPC Container Ships Invest) reported TCE revenues of USD 33m (+6.7% vs. ABGSCe of USD 31m), while EBITDA came in at USD 11m (vs. ABGSCe of USD 13m). Operational cash flow was USD 1.2m, negatively affected by working capital movements. Cash balance stood at USD 22m. We estimate a gross LTV to 52% at the issuer group. In terms of outlook, the company notes that demand growth softened in Q3 18, with economic uncertainties and concerns regarding bunker prices, trade wars dampening the effect on market sentiment. These uncertainties have caused charters to pursue a more defensive strategy, which have kept charter period as short and flexible as possible. For 2019, the company expects intra-region trades to grow by 5-6%, while it expects supply growth of 2% - suggesting a modest demand surplus, in line with our views. The report contains no new information regarding the announced scrubber investment, which we expect will be focus the conf. call later today. M2 Asset Management: continues to increase Castellum holdings Rental income from its directly owned properties was SEK 60m (+11% y-o-y), while income from property development in Wästbygg was SEK 818m (+27% y-o-y). EBIT for the directly owned business came in at SEK 56m (+27% y-o-y). Net debt increased to SEK 3,555 vs. SEK 3,286 in Q2 18, which is partially driven by higher debt and a lower cash position. We estimate that this stems from M2 s increased position in Castellum and by looking at Holdings.se, M2 now owns 5.63% of the capital, with a total value of SEK ~2.5bn. We will revert with a more in-depth comment and value adjusted equity estimate in due course. BOA OCV: Short-term work secured for Deep C and Sub C BOA reported above market expectations, with Revenues of NOK 60m and EBITDA of NOK 14m. Operating ash flow was NOK 15m, while investment activities was NOK 3.5m negative. Cash at hand post quarter was NOK 117m, slightly above expectations. The company made no changes to its estimated total distribution from TBK Asset realization (NOK m wherof NOK 75.5 has been received so far). BOA Sub C finished its 5 month contract with Adwan and has secured new short term contract for work in 1H19, while the Deep C received an extension in West Africa for Q1 19. In terms of outlook, the company still sees a recovery in the market, however the sharp drop in oil prices represent a risk to the magnitude of the recovery. Chembulk: Still soft chemical tanker markets Chembulk reported Revenues of USD 48.5m and EBITDA of USD -0.7m while adjusted EBITDA was USD 1.8m, adjusted for one-offs of USD 1m (primarily related to stock option expenses (non cash) and a one off costs of changing ship managers). Utilization was 96.4%. Cash flow from operations was negative USD m, with Free Cash Flow at USD 4.2m, with a positive cash effect from the sale of vessels. Q3 cash ended at USD 96m, with Free liquidity being USD 86m. The company reported market value of assets at USD 341m, in addition to USD 7.5m of cash standing on the Disposal Account following the sale of the Chembulk Shanghai, putting total asset backing for the bond at USD 348m, down USD 15m or 4% since its last compliance test. While the company continues to believe in a favourable supply/demand dynamics should lead to a market recovery by late 2019, YTD 18 has been impacted 30 November 2018 ABG Sundal Collier 2

3 by several negatives. Uncertainty created by the recent global trade has had an adverse impact on market sentiment, reducing activity levels for chemical trades. Meanwhile, a soft Q3 product tanker market has led to continued competition from MR product tankers for chemical cargoes. The soft market conditions have not allowed the industry to raise freight rates to cover bunker cost increases in the spot market, compressing TCE margins. Scrubbers: Diamond S fix scrubber-fitted tankers at premium rates Diamond S Shipping, a US-based shipping company, has chartered out the two suezmaxes Namsen and Loire (2016-built) at USD per day to BP, according to industry sources. This compares to Braemar ACM assessing the three-year rate for a suezmax vessel at USD 24,000 per day as of last Friday, indicating a 3,500 per day premium. That being said, the same shipbroker suggested that a scrubber fitted ECO suezmax vessel should fetch USD 30,250 per day indicating a 50% pass through of fuel savings to the charterer. Legres Q3: strong growth driven by collection segment Total sales was SEK 213m (+30% y-o-y), while gross profit came in at SEK 62m (+13% y-o-y),ebitda for the period was SEK 35.4 (+19% y-o-y). Reported ICR was 3.6x (-0.1x y-o-y), while reported NIBD/EBITDA was 2.0x (-0.6x y- o-y). The company states that the high growth was particularly driven by a strong development within its collection segment, were Norway especially delivered above expectations. Stendörren: Makes acquisition in Västerås The company announced that it has made an acquisition in Västerås for SEK 36m. The property encompass 3,459 sqm which is divided over wharehouse, office, retail and commercial space. Consolidation is expected in late November and we do not expect any major effect on credit metrics as total rental income is SEK 4.2m. Hoist Finance: acquires Greek loan portfolio Hoist finance has signed a contract to acquire a Greek loan portfolio consisting out of EUR 2bn in book value for a total investment of EUR 76m. The seller is Alpha bank and the portfolio consist out of overdue consumer credits and small company loans. Pioneer Property Group ASA: New CEO in place Today, Anders Løken has been appointed as the new CEO of Pioneer Property Group. He comes from the position as Investment Director of the Adolfsen Group., His previous experience encompass 10 years at Webstep, whereas 4 as the CFO which included the period of the successful IPO of the Webstep at Oslo Stock Exchange in Reported corporate HY bonds traded in Oslo at Thursday 29 November 2018 Source: ABG Sundal Collier, company data 30 November 2018 ABG Sundal Collier 3

4 ssss Bonds daily Analyst certification I/We, Alexander Jost, Andreas Johannessen, Eric Wahlström, Haakon Amundsen, Rikard Magnus Braaten, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report. I/We further certify that I/We have not been, nor am/are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report. Analyst valuation methods When evaluating the credit risk of the issuer, we look at credit ratios, management and corporate strategy, business risk, industry risk and management risk appetite. Further, we look at dividend and financial policies. 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5 ABGSC Research Department Joint Global Head of Research Christer Linde Head of Introduce /Company-sponsored research Arash Hakimi Fard Strategy Christer Linde, Quant/Technical Capital Goods Anders Idborg Olof Cederholm Karl Bokvist Chemicals Construction & Real Estate Tobias Kaj Philip Hallberg Laurits Louis Kjaergaard Consumer Goods Ludvig Kapanen Credit Research Alexander Jost Rikard Magnus Braaten Andreas Johannessen Haakon Amundsen Eric Wahlström Financials Magnus Andersson Mads Thinggaard Patrik Brattelius Jan Erik Gjerland Jonas Bru Lien Food & Beverages Healthcare Sten Gustafsson Christopher W. Uhde Ole Henrik Bang-Andreasen lnvestment Companies IT Simon Granath Metals & Mining Oil & Gas Karl Fredrik Schjøtt-Pedersen Oil Service Haakon Amundsen Lukas Daul Karl Fredrik Schjøtt-Pedersen Online Gaming Erik Moberg Stefan Knutsson Pulp & Paper Øystein Elton Lodgaard Renewable Energy Casper Blom Retail Ludvig Kapanen Seafood Vidar Strat Services Victor Forssell Shipping & Transport Dennis Anghelopoulos Casper Blom Lukas Daul Telecom Operators Peter Kurt Nielsen Utilities Small Caps Arash Hakimi Fard Emmi Östlund Johan Nilsson Wall Laurits Louis Kjaergaard Media Norway Sweden Denmark United Kingdom USA Germany Singapore Pb Vika Box 7269 Forbindelsesvej 12, 10 Paternoster Row, 5th fl 850 Third Avenue, Suite 9-C Schillerstrasse 2, 5. OG 10 Collyer Quay NO-0115 OSLO Norway SE STOCKHOLM Sweden DK-2100 COPENHAGEN Denmark LONDON EC4M 7EJ UK NEW YORK, NY USA DE FRANKFURT Germany Ocean Financial Center #40-07, Singapore Tel: Tel: Tel: Tel: Tel Tel Tel Fax: Fax: Fax: Fax: Fax Fax November 2018 ABG Sundal Collier 5