EU TRANSPORTATION: Mobico | Event of Default

(MCGLN; Ba2/NR/BBB-; Stable) {MCG LN Equity}

Hearing speculation around a potential Event of Default (EoD) following the asset sale.
Based on docs, we do see EoD being met (not legal advice).

If triggered, this could force early redemption at par on:
• £250m 3.625% due 2028
• €500m (£425m) 4.875% due 2031
→ Total: £675m repayment vs. ~£530m liquidity (£245m cash + £275–290m expected proceeds)
→ Co was barely FCF positive this year (+£31m we see)
The sale is expected to complete in early 3Q (July-Aug)

Doc Analysis
The cessation of business clause appears in both the £28s and €31s base prospectus (standard subclause (h)). It is triggered if the Issuer, Guarantor, or any Material Subsidiary ceases (or threatens to cease) substantially all business unless:

1. It is part of a reorganisation or restructuring, not involving insolvency, with prior Trustee or bondholder approval; or
2. For a Material Subsidiary, the assets are distributed internally to an entity that becomes Material as a result.

Why we think the carve-outs do not apply:
• The disposal is part of a solvent restructuring, but there is no evidence of Trustee or bondholder approval;
• Proceeds are cash, not a transfer of assets to another group entity;
• The clause ends with: “which as a result of the distribution of such assets becomes a Material Subsidiary” — strongly suggesting that actual assets, not sale proceeds, must be transferred internally.

Material Subsidiary Test
• Defined as ≥10% of gross assets or pre-tax profit
• On FY figures:
• NASB gross assets = £745.8m (including the £550m impairment recorded in 4Q)
• Group total assets = £3,238.5m
→ 23% → comfortably clears threshold

Unless a waiver or approval is granted retroactively, EoD could be triggered if 25% of holders act.