Emeco Holdings Acquisition, page-11

I think there is strong upside from here but I can’t tangibly point out the reasons as yet.

More than the share price, the credit spread on their US$360m 2022 bond issue has tightened aggressively over the last few weeks – signalling that bondholders are starting to take a favourable view. With a business like this at its current stage and high leverage, bondholders tend have a much more informed view than equity holders.

My guess is that the utilisation rates for the equipment are reaching a tipping point where they will improve at a much quicker pace from here on. Once the slack in the rental market gets consumed, EHL’s ability to raise prices for its contracts means that cashflow will improve as quickly as it fell when utilisation rates dropped. Especially given the consolidated market position EHL has post merger. I think the supports from the bank will be readily forthcoming to extend the revolver at better pricing.

High risk but I am happy holding until I see 70 cents.