NEXIIM 1¾ 04/24/2027 & NEXIIM 0 02/24/28

Publicly traded companies mentioned herein: Nexi SpA (NEXI IM)

Highlights

The presenter has been analyzing the convertible bonds universe in the last couple of months given recent weakness in the equity markets, and one opportunity he acted on are the two convertible bonds of Nexi SpA (NEXI IM). One of these convertible bonds pays a 1.75% coupon, matures in April 2027, is trading at a ~20% discount to par, and has a conversion price of €19.47 per share; the other is a zero coupon that matures in February 2028, is trading at a ~30% discount to par, and has a conversion price of €24.55 per share. NEXI is an Italian payments services provider that merged with two European peers in 2021 to become the largest payments company in Europe. The proforma NEXI is a €3.2B revenue, €1.5B EBITDA business that has derated significantly on competitive disruption concerns, causing the stock price to fall 40% YTD and >50% in the last twelve months to its current €8 per share. In contrast, the presenter feels NEXI is well-positioned in the competitive landscape and is a beneficiary of macroeconomic and secular trends, as evidenced by its volume growth acceleration. Given the price of the longer-dated convertible bond, investors can create the business at 2x EBITDA, limiting the position’s downside. As the company continues to perform, investors will receive 7% yields with incremental upside from the bonds approaching par quicker and 5/6-year equity options on the converts moving back into the money.