List of News concerning Spread Research



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  • (BN) Casino Debt Swaps Rise to Record as French Protests Add Pressure (December 2018)


    Casino Debt Swaps Rise to Record as French Protests Add Pressure
    2018-12-11 09:30:27.345 GMT


    By Katie Linsell
    (Bloomberg) -- The cost of insuring debt of supermarket chain Casino Guichard-Perrachon SA rose to a record after weeks of civil unrest in France.
    Credit-default swaps protecting Casino’s bonds for five years rose nine basis points to 619 basis points on Monday, signaling a 41 percent probability of default within that period, according to data from CMA. That’s the highest closing price since CMA began tracking the data in 2009, and the contracts were little changed on Tuesday.
    The Yellow Vest or Gilets Jaunes protests, named for the high-visibility jackets worn by demonstrators, are adding to investor concerns about Casino’s ability to support its indebted parent Rallye SA. French stores have lost about 1 billion euros ($1.1 billion) in revenue since the beginning of the demonstrations last month, according to the French retail federation.

    “Casino has definitely been impacted by the Gilets Jaunes, like other retailers,” said Christine Kam, an analyst at brokerage firm Octo Finances in Paris. “It also still has the extra problem of Rallye’s leverage which weighs on sentiment.”
    Casino remains focused on executing its deleveraging plan and reducing its net debt in France by 1 billion euros this year, while continuing to invest in its operations, a spokesman for the retailer said in response to questions about the move.
    The protests, started with a grass-roots movement against fuel tax hikes, led the government to postpone planned legislation that would have forced retailers to increase prices.
    That will be negative for Casino and rival Carrefour SA, according to analysts at Kepler Cheuvreux, who have a hold recommendation on both companies.
    Credit-default swaps on Carrefour rose 8.5 basis points on Monday to 116 basis points, the highest since 2013, CMA data show. Contracts on another retailer, Auchan, rose nine basis points on Monday to a record 234 basis points, CMA data show.
    Both were little changed on Tuesday.

    Officials at Carrefour and Auchan declined to comment on the moves. A wider gauge of high-yield risk sentiment rose to the highest level since July 2016 on Monday. The Markit iTraxx Europe Crossover Index fell seven basis points on Tuesday to 349.5 basis points, according to CMA.

    “Longer-term concerns are still there due to continued high leverage and weak cash generation,” Anthony Giret, an analyst at Spread Research in Lyon, said of Casino. “In a bearish market for risky assets such as the one we’ve had since October, Casino and Rallye are likely to underperform.”

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

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    [FRENCH] (Agefi) Atalian entend accélérer son désendettement en ouvrant son capital


    Par Yves-Marc Le Réour

    Contrôlé à 95% par la famille Julien, le groupe de services externalisés songe également à céder sa participation dans Getronics.

    Confronté à une érosion de ses marges et aux effets temporairement dilutifs de certaines acquisitions, Atalian est désormais plus prudent sur son désendettement. Le groupe de services externalisés aux entreprises affichait au 30 septembre dernier une dette nette de 1,33 milliard d’euros, correspondant à 6,6 fois son excédent brut d’exploitation (Ebitda) hors impact de la norme IFRS 16 sur les contrats de location, contre 5,8 fois à fin juin 2018 et 5,7 fois en données pro-forma fin 2017.
    Cette dégradation provient essentiellement de la prise de contrôle du britannique Servest, d’un cash-flow libre négatif et du versement d’un dividende exceptionnellement élevé. «La renégociation d’importants contrats en France a pesé sur les marges du groupe», relève Benjamin Sabahi, responsable de la recherche crédit chez Spread Research. Alors qu’il visait auparavant un levier financier de 4,5 fois dans les deux prochaines années, le groupe familial anticipe désormais un ratio compris entre 5 et 5,5 fois d’ici 3 à 4 ans en s’appuyant sur sa génération de cash-flow. Mais ce levier pourrait être ramené aux alentours de 4,5 fois grâce à l’entrée de partenaires stratégiques à son capital et à la monétisation de sa participation de 28,3% dans Getronics Services au Royaume-Uni, valorisée environ 100 millions d’euros dans ses comptes. Cette cession permettrait à elle seule de réduire de 0,5 fois son ratio d’endettement net.
    La famille Julien, qui détient 95% du capital, a déjà donné son accord à l’entrée d’investisseurs potentiels. A plus court terme, le groupe continuera à optimiser son besoin en fond de roulement et il souligne que les dividendes distribués retomberont dès l’an prochain à leur rythme de croisière d’environ 5 millions d’euros, contre 29 millions pour l’exercice en cours.
    Si les résultats du quatrième trimestre 2018 devraient demeurer mitigés, «le rattrapage attendu concernant la rentabilité des nouveaux contrats et les synergies de coût découlant de l’intégration de Servest feront sentir leur plein effet en 2019», souligne Benjamin Sabahi.
    La liquidité d’Atalian a en outre augmenté sur le trimestre écoulé, en atteignant 219 millions d’euros contre 198 millions au deuxième trimestre, alors que le groupe n’a aucune échéance de dette avant 2024. «La communication financière et la transparence sont nettement améliorées», jugent de leur côté les analystes crédit d’Octo Finances, en ajoutant que les obligations ont une rémunération attrayante comprise entre 7,5% et 8%.
    Yves-Marc Le Réour can be joined at https://www.agefi.fr

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    Riskiest Junk Bonds Make Surprise Appearance in New Issue Market (November 2018)


    Riskiest Junk Bonds Make Surprise Appearance in New Issue Market
    By Laura Benitez

    (Bloomberg) -- Investor appetite for risky new deals is about to be tested even as Europe’s high-yield market is smarting from one of the biggest selloffs since 2016. Stada Arzneimittel AG and Cognita Schools Ltd are this week marketing bonds rated CCC to help finance their respective buyouts. The low-rated deals will be the first real test of demand for triple C paper since Akzo Nobel Specialty Chemicals sold 485 million euros ($547 million) of Caa1 notes in September.
    "A combination of seasonally declining liquidity, a poor technical backdrop, and increasing fundamental concerns are making access to primary markets challenging for lower quality credits," said Fraser Lundie, co-head of credit at Hermes Fund Managers Ltd in London, which manages 36 billion pounds ($46 billion) of assets. “There’s a lot of pain for lower quality credit, particularly those in the triple C range.”
    In the wake of the recent sell off, which has seen yields of European sub-investment-grade debt climb to their highest level for more than two years, and with year-end rapidly approaching, investors are positioned cautiously to preserve returns or minimize losses. But borrowers with a need to fund buyouts may not be able to wait for the optimal spot to issue debt. And that’s the case for both these deals.
    Cognita’s proposed 255.3 million-euro offering will support its acquisition by Jacobs Holding AG. Stada’s planned 250 million-euro sale will help pay out minority shareholders in the German drugmaker, which include activist hedge fund Elliott Management Corp.
    Stada’s Debt Sale for Delisting Set to Swell Leverage Ratio

    Risk Off

    Triple C issuance by non-financial corporates in Europe has shrunk to 2.1 billion euros-equivalent so far this year, compared with 5.7 billion euros in 2017, according to data compiled by Bloomberg. And most of this year’s triple C-rated supply has emanated from sponsor backed deals for buyouts where leverage multiples have typically been higher.
    The significant repricing the market has undergone in recent weeks means pricing expectations among investors for new issues are likely to have increased.
    Remi Ramadou, a credit analyst at Spread Research said in a note published on Thursday that he does not recommend buying Stada’s new unsecured bonds below 7.5 percent, which represents a premium of 50 basis points over the existing unsecured notes. Given that secured notes are currently trading at a yield- to-worst of about 4.4 percent for a net secured leverage of 5.1 times, bonds paying about 7.5 percent would offer a fair premium of 300 basis points for one turn of leverage, in spite of the uncertainties amid the deleveraging prospects, Ramadou said. Both Cognita and Stada are selling bonds as part of bigger financing packages that include leveraged loans. Those loans haven’t experienced a smooth ride among investors.
    Playing in their favor could be that they are sponsor- backed credits rather than corporate deals, where many of the recent blow ups have occurred. Even though leverage may be higher, investors have taken comfort in the perceived due diligence process conducted by private equity firms during leveraged buyouts.

    To contact the reporter on this story:
    Laura Benitez in London at lbenitez1@bloomberg.net
    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    Charles Daly, Tom Freke

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    (Refinitiv) European HY sees second largest outflow – Spread Research


    27 November 2018 By Yoruk Bahceli

    The European high-yield market saw outflows surge to €1.4bn last week, the second largest level recorded by Spread Research data.
    The credit research firm, which has tracked the data since 2010, said the scale of outflow was on par with that recorded during February’s correction.

    Short-term high-yield funds lost €234m, bringing losses year-to-date to €3bn, while long-term funds saw €1.1bn exit, one of the largest outflows ever for that segment. This brings year-to-date outflows to €6.6bn for long-term funds.
    Spread Research said some long-term funds are becoming forced sellers in order to meet redemptions, even with huge discounts on prices.
    ETFs were not saved either, seeing outflows of €77m.

    With last week’s losses, overall European high-yield funds have lost €9bn year-to-date, compared to €3.9bn in 2017.

    Yoruk Bahceli can be joined : Yoruk.Bahceli@refinitiv.com

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    [FRENCH] (Agefi) Les signatures fragiles face à des investisseurs moins complaisants


    Les signatures fragiles face à des investisseurs moins complaisants
    par Florent Le Quintrec

    Les échecs d’émissions se multiplient ces dernières semaines, après une année marquée par des secousses macro et microéconomiques.


    Le marché obligataire européen a connu un nombre inhabituel d’opérations abandonnées ou reportées ces dernières semaines. Plusieurs signatures non investment grade ont renoncé à placer leur papier, évoquant des conditions de marché défavorables. Fin septembre, My Money Bank avait reporté une émission de covered bonds de 500 millions d’euros, qu’il vient de réussir à placer ; début octobre, Ingenico a dû remettre à plus tard le placement de 300 millions de titres hybrides. Puis Volksbank et Van Lanschot ont retiré leur emprunt subordonné AT 1 (additional tier one), de respectivement 150 millions et 75 à 100 millions d’euros. RCI Bank aurait également abandonné l’idée d’émettre une obligation en livres à cinq ans. En high yield, Bilfinger a renoncé à émettre 250 millions, devenant le neuvième émetteur à abandonner ou reporter une opération sur ce segment, même si Dometic, qui avait suspendu son émission en juin, a finalement émis 300 millions en septembre.
    Le contexte n’y est pas étranger : remontée des taux longs, guerre commerciale lancée par Donald Trump, Brexit à l’issue toujours incertaine, turbulences sur les marchés émergents et, plus récemment, déboires budgétaires de l’Italie ont refroidi les marchés. « La volatilité accrue a rendu les investisseurs plus nerveux. La construction des livres d’ordres semblant ne pas pouvoir se passer comme prévu pour certains émetteurs, ceux-ci ont préféré se retirer du marché avant l’opération », explique Emmanuel Schatz, head of corporate credit & ABS chez Ostrum Asset Management.
    En high yield, ce phénomène a atteint des sommets cette année, mais pas uniquement pour des raisons macroéconomiques. « Environ six milliards d’euros d’opérations ont été annulés depuis le début de l’année, pour un total d’émissions de 62 milliards toutes devises confondues, ce qui doit constituer un record, estime Benjamin Sabahi, responsable de la recherche crédit chez Spread Research. En plus des problèmes macro¬économiques, il y a eu des chocs de gouvernance, comme chez Samsonite, et des mauvais résultats qui ont fait chuter certaines obligations de 40 à 50 points, à l’image de CMC Di Ravenna. Toujours dans la construction, le groupe Astaldi a aussi fait défaut, poussant les investisseurs à davantage de prudence, notamment dans le ‘retail’ et la construction. »

    Ecartement des spreads

    Autre élément d’inquiétude, la multiplication des profit warning consécutifs à une émission : l’allemand Tele Columbus et le français Fives ont revu à la baisse leurs per¬spectives quelques semaines seulement après avoir placé leurs titres.
    En termes d’offre, les candidats à une émission doivent désormais consentir certains efforts. « Les émissions qui ont été retirées du marché sont soit trop ‘covenant-¬lite’, soit trop gourmandes sur le ‘spread’. Il est compliqué pour un investisseur de sortir une ligne de son portefeuille pour faire de la place à ce type de papier », analyse Philippe Lespinard, chief investment officer et co-head of fixed income chez Schroders.
    La documentation de ces emprunts, qui suscite l’ire de certains gérants tant elle est devenue permissive ces dernières années, évolue peu selon les observateurs, hormis sur le sujet sensible des restricted payments (remontée de dividendes, rachat d’actions…), qui peut faire l’objet de discussions avec les investisseurs. C’est donc sur le rendement que les émetteurs doivent désormais se montrer plus souples. Pour preuve, le spread moyen sur le marché du high yield a progressé de 95 points de base (pb) depuis janvier, à 440 pb par rapport au taux sans risque.
    De quoi anticiper un ralentissement du marché l’année prochaine. « Tous les émetteurs, y compris ceux ayant des business models cycliques ou plus fragiles, se sont beaucoup financés sur les marchés depuis trois ans et ont moins de besoins aujourd’hui. Les émetteurs ‘high yield’ rembourseront de moins en moins souvent en payant le ‘call’ [option de remboursement anticipé, NDLR], donc la tendance à la baisse des volumes sur le marché primaire devrait se poursuivre en 2019 », estime Benjamin Sabahi.

    Florent Le Quintrec can be joined at https://www.agefi.fr

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    (Refinitiv) Spread Research to launch governance risk score


    Spread Research to launch governance risk score
    By Yoruk Bahceli

    Spread Research is launching methodology to score governance risk as part of its credit analysis as high-yield investors’ focus on governance issues grows.
    The French ratings agency, which also provides independent credit research focused on sub-investment-grade companies to the buyside, announced on Thursday that it is launching the methodology in partnership with its environmental, social and governance division, EthiFinance.
    The methodology will assign credits a governance score to be included in Spread’s credit view. The agency expects to be able to identify a potential spread impact from weak governance. The score will be based on 15 criteria of governance, which are grouped into five categories, Pierre-Yves Le Stradic, head of research at EthiFinance, told IFR.
    The categories address shareholder behaviour, board considerations, leadership and auditors, as well as a fifth segment that looks at various other governance issues, including related party transactions.
    Le Stradic said that much of current ESG research focuses on long-term concerns from the perspective of shareholders, while high-yield investors are concerned with whether or not the company will pay them back in a shorter timeframe.
    He added that the 15 criteria were chosen in line with likelihood of occurence in a shorter rather than longer period of time and based on issues that pertain to creditors rather than shareholders.
    European high-yield investors are also increasingly focusing on ESG issues and integrating these concerns into their credit analysis. That many high-yield issuers are non-listed and restrict access to their investor relations sites has been a particular challenge for those investors.
    “The challenge that was upon us was to drive consistent information in a universe where most issuers are non-listed. We’ve been focusing on criteria where the availability of the information is quite high,” Le Stradic said.
    Spread Research is launching its methodology at a time when the high-yield market is seeing more and more single-name sharp moves as bonds see big price drops on bad news thanks to tight coupons that do not leave room for error.
    “It’s important to bear in mind that, in an expensive high-yield and credit market, asset managers simply can’t afford to have losses between 10 points for a marginal problem up to 80-90 in very stressed scenarios,” Spread’s head of research Benjamin Sabahi told IFR.
    “This is an asymmetric market we are talking about, so if you have a weak score in terms of governance, you have to be punished by that as the spread impact can be sizeable.”
    Sabahi added that investors need to be clear in differentiating between transparency and governance risks.
    “Investors have a tendency to mix up problems. You could have a company that is very good in terms of transparency … but that company could still default on its debt,” he said, citing the infamous example of Abengoa.
    Spread will integrate the new framework into its coverage by the first half of 2019 and hopes to include social and environmental factors into its analysis thereafter.

    Yoruk Bahceli can be joined : Yoruk.Bahceli@refinitiv.com

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    (BFW) Spread Research to Weigh Company Governance in Credit Analysis (October 2018)


    Spread Research to Weigh Company Governance in Credit Analysis
    2018-10-25 13:01:10.369 GMT


    By Katie Linsell
    (Bloomberg) -- Spread Research, an independent high-yield research firm based in Lyon, France, is adding a new methodology focused on borrowers’ corporate governance to enhance its analysis, according to a statement.
    * Approach to consider 15 criteria relating to governance, including:
     ** shareholders
     ** board considerations
     ** executive leadership
    * Co. will publish a governance score for each borrower out of 5 and will disclose how score should impact the bond spread
    * Co. plans to rate ~200 companies in first half of next year
    * Methodology developed with EthiFinance, division of Spread Research focused on environmental, social and governance standards
     ** Co. plans to add environmental and social factors to analysis in due course


    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

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    (BN) OHL Shares, Bonds Fall as First Half Losses Highlight Challenges (September 2018)


    OHL Shares, Bonds Fall as First Half Losses Highlight Challenges
    2018-09-27 10:54:57.808 GMT


    By Macarena Munoz and Katie Linsell
    * (Bloomberg) -- Shares and bonds of Obrascon Huarte Lain SA fell on doubts about the future direction of the Spanish builder’s business following the sale of its concessions unit.
    OHL’s 270 million euros ($316 million) of notes due March 2023 slumped 10 cents on the euro to 85.5 cents, the biggest decline in about two years, according to data compiled by Bloomberg. The shares fell as much as 23 percent to 1.98 euros, their lowest level since August 2016.
    * OHL completed the sale of its concessions unit in April to Australia’s IFM Investors, valuing the unit at 2.78 billion euros. Investors who were encouraged when the sale was announced in October as a move to reduce OHL’s debt load are still looking for more signs of improvement in the construction business that remains.
    * “After the divestment, OHL is more of a pure construction company and the results of the remaining business so far haven’t been great,” said Marc Pierron, a senior credit analyst at Spread Research in Lyon. “They have a decent amount of work to do to turn around the construction business.”
    * OHL last night reported six-month losses of 843.6 million euros compared to a 32.1 million-euro loss a year earlier. Most of the losses, 550.5 million euros, were due to an accounting adjustment as a result of the sale of its OHL Concesiones unit, the company said.
    * “Even after all efforts done to clean the financial structure and restructure the company, the situation is still not on course,” Angel Perez, an analyst at Renta 4 Banco in Madrid, wrote in a note to clients.

    To contact the reporters on this story:
    Macarena Munoz in Madrid at mmunoz39@bloomberg.net; Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Beth Mellor at bmellor@bloomberg.net
    Charles Penty, Andrew Blackman

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    (BFW) "Huge" Interest Savings for AkzoNobel Chemicals: Spread Research (September 2018)


    "Huge" Interest Savings for AkzoNobel Chemicals: Spread Research
    2018-09-21 08:48:50.766 GMT


    By Ruth McGavin
    (Bloomberg) -- AkzoNobel Specialty Chemicals has locked in "huge" cash interest savings on its LBO financing by cutting pricing versus what was initially offered during syndication, and by increasing the amount of loans by 85% vs 79%, according to a report by Spread Research.
    * Cash interest expenses will be ~EU340m, down 19% vs the EU420m it would have paid based on opening price talk across its loans and bonds: report
    * This marginally improves projections for net adjusted leverage, report says, to 5.2x total at end of 2019 from 5.3x initially expected, 4.6x at end of 2020 vs 4.8x, and 4x at end of 2021 vs 4.4x
    * Free cash flow seen at EU425m in 2020 and EU480m in 2021
    * Spread Research notes a 100bps premium vs CCC+/B- rated bonds in more stable markets, and says the bond should perform well up to FY19, "before the re-leverage risk could materialize amid covenant-lite documentation"
    * NOTE: Final terms for loans here and bonds here: Bloomberg


    To contact the reporter on this story:
    Ruth McGavin in London at rmcgavin1@bloomberg.net To contact the editors responsible for this story:
    Tom Freke at tfreke@bloomberg.net
    V. Ramakrishnan

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    (BN) Hedge Funds Cut Shorts in Casino Bonds After Rallye Lifeline (September 2018)


    Hedge Funds Cut Shorts in Casino Bonds After Rallye Lifeline
    2018-09-19 15:03:23.263 GMT


    By Katie Linsell
    * (Bloomberg) -- Short sellers in French supermarket chain Casino Guichard-Perrachon SA were burned this week when its indebted parent got a last-minute loan lifeline.
    * Hedge funds have been scrambling to cut short positions on both companies’ bonds since Rallye SA announced on Sunday that it had signed a 500 million-euro ($585 million) credit facility.
    Shorts on Casino fell by 63 million euros from a record 373 million euros last week, while those on Rallye fell by 23 million euros to 56 million euros, according to IHS Markit Ltd.
    * The new loan, which doesn’t require a pledge of Casino shares as collateral, will help Rallye pay about 970 million euros of bonds due by the end of March. Casino’s plunging share price has threatened to limit Rallye’s access to existing credit lines because most require the stock as collateral.
    * “It’s a big step for Rallye, which is already regaining the market’s confidence,” said Benjamin Sabahi, head of credit research at Spread Research in Lyon, France. “The loan must have caught a lot of investors by surprise. The bonds have recovered a great deal.”
    * Casino’s most-shorted bond, its 744 million euros of notes due in June 2022, rose 2 cents on the euro this week to 92 cents, the highest in more than a month, according to data compiled by Bloomberg. Rallye’s 300 million euros of bonds due in March jumped 16 cents on the euro to 98 cents, the data show.
    * Credit-default swaps protecting against losses on Casino’s bonds for five years fell 99 basis points this week to 414 basis points, while contracts insuring Rallye’s bonds dropped by the equivalent of more than 1,300 basis points to about 1,510 basis points, according to data from CMA.

      Loan Terms

    * “It will be necessary to ask Rallye to unveil the terms of the credit facility and if drawing on it is subject to any particular criteria,” Alain Lopez, an analyst at brokerage firm Octo Finances, wrote in a note to clients on Monday. “We find it hard to believe that Rallye’s banks have given it a gift.”
    * The loan has no pledge over Casino’s shares, floor on Casino’s share price or other link to Casino, Franck Hattab, Rallye’s chief executive officer, said in response to questions about the facility. Hattab declined to comment further on the terms of the loan.
    * “The group is pleased that investors are once again interested in the fundamentals of the company and in the success of its recent initiatives,” a Rallye spokesman said separately, referencing a recently-announced partnership between Casino’s Monoprix chain and Amazon.com Inc.
    * A spokesman for Casino said the performance of the company is in line with guidance. “We are looking for this to be reflected in further improvement in the share price,” he said.

      Share Surge

    * Casino’s stock has surged 43 percent from a 22-year low on Sept. 3. It was trading at 37.9 euros a share at 4:50 p.m. in Paris on Wednesday, the highest level since May, data compiled by Bloomberg show.
    * Still, bearish investors are holding onto their downward bets, with short interest little changed from a record 18.9 percent of Casino’s outstanding shares on Friday, according to IHS Markit’s data.
    * Casino has been in a battle with short sellers including Carson Block, whose Muddy Waters fund disclosed a bet against its stock in late 2015. He’s taken aim at the retailer’s complicated financing amid brutal competition in France and sent the shares tumbling with a tweet last month that said Casino hadn’t published accounts as required for one of its subsidiaries.

    --With assistance from Thomas Beardsworth, Lisa Pham and Neil Denslow.

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

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    (BN) Casino Share Price Nears Danger Zone for Rallye’s Debt Due 2019 (September 2018)


    Casino Share Price Nears Danger Zone for Rallye’s Debt Due 2019
    2018-09-03 14:54:48.112 GMT


    By Katie Linsell
    * (Bloomberg) -- The latest plunge in French grocer Casino Guichard-Perrachon SA is pushing its indebted parent Rallye SA into a precarious position, according to analysts.
    * Rallye must pledge Casino shares as collateral to draw down most of its credit lines and, with the stock price below 27 euros ($31), it will run out of collateral by the time it needs to refinance debt next year, said Anthony Giret, an analyst at Spread Research in Lyon, France. Bank of America Corp. analyst Tanya Kovacheva calculates a lower threshold of 26.4 euros, according to a note she wrote to clients last month.
    * Casino’s shares were trading near a 22-year low at 26.5 euros at 4:50 p.m. in Paris.
    * “If Rallye pledged all its Casino shares to draw on credit lines today, they would barely cover the 2019 debt maturities at the current share price,” said Giret. “There is hardly any more room. It’s really on the edge.”
    * Most of Rallye’s facilities require it to pledge Casino stock worth 130 percent of the amount drawn. The current price means that Rallye won’t have enough Casino shares left next year if it uses credit lines to repay this year’s debt maturities, the analysts said. Casino’s Chief Executive Officer Jean-Charles Naouri controls the grocer through Rallye.
    * “The speculation over the Casino share price and its relation to Rallye’s ability to meet its bond commitments is being driven by a few investors,” said Franck Hattab, Rallye’s chief executive officer. “We can reassure the investors who support Rallye and Casino, and who are confident that the share price will be built back, that the share price threshold being guessed at is a long way from reality. We are well aware of our debit commitments and we are working with all our partners to achieve long-term growth for the business.”
    * Rallye has 300 million euros of bonds coming due next month, when it also must repay exchangeable bondholders 370 million euros. It has 300 million euros of bonds maturing in March and 50 million euros of loans due next year, according to the company’s first-half earnings. The company also had 302 million euros of commercial paper outstanding in July, according to the latest data from the French central bank.
    * Out of 1.7 billion euros of undrawn credit lines, 1.4 billion euros require share pledges as collateral, according to Rallye’s results as of June 30.

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

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    (BN) Lowell Considers Funding Alternatives to Junk-Bond Market (August 2018)


    Lowell Considers Funding Alternatives to Junk-Bond Market
    2018-08-30 09:23:25.884 GMT


    By Thomas Beardsworth
    * (Bloomberg) -- Europe’s most leveraged debt collector is considering alternative funding options amid concerns it may be locked out of the high-yield bond market.
    * Lowell is discussing the possibility of issuing debt secured by its portfolios of defaulted consumer loans, Chief Financial Officer Colin Storrar said in an interview on Wednesday after reporting second-quarter earnings. The Leeds, England-based company has sufficient cash and available credit from its revolving loan -- as well as other financing options -- and management doesn’t “anticipate coming back to the high-yield market anytime soon,” he said.
    * While some bondholders are opposed to Lowell issuing asset- backed securities because it would subordinate their claims, they appreciate the need for the company to find cheap financing to support growth, Storrar said. Morgan Stanley said in June that Lowell had “very little possibility” of selling junk bonds after investors pushed back on an offering by rival Intrum AB.
    * Lowell, which owes banks and investors about $3 billion, last issued bonds in January to finance its acquisition of Intrum’s Nordic assets. It pays 3.5 percent over benchmark rates for a bank-lending facility it more than doubled in May, about half the indicative cost of raising money in the bond market after a selloff in its publicly-traded debt this year.
    * Asset-backed debt “comes with a lower coupon and free cash flow,” Storrar said. “But I’m mindful of the hesitation of bondholders, not least with regard to the security position. I took time this morning to understand and respond to those concerns,” he said, referring to an investor call on which he said there were more than 100 analysts.
    * Lowell’s outstanding bonds, which yield about 7 percent, would still be fair value if the company raised 200 million pounds of asset-backed securities, said Benjamin Sabahi, head of credit research at Spread Research, who recommends buying the notes.
    * Storrar declined to comment on whether Lowell will exercise an option in November to redeem 230 million pounds ($299 million) of 11 percent junior bonds, its most expensive debt, at 108.25 percent of face value. Investors shouldn’t assume that Lowell will use future financing to buy back bonds rather than grow its business, he said.
    * Separately, competitor Arrow Global Group Plc’s chief executive officer said in an interview on Thursday that the company doesn’t need to raise money in bond markets until 2024.

    To contact the reporter on this story:
    Thomas Beardsworth in London at tbeardsworth@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses, Shannon D. Harrington

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    (BN) BNP Paribas Is Said to Offer Bet on Timing of Rallye Default (August 2018)


    BNP Paribas Is Said to Offer Bet on Timing of Rallye Default
    2018-08-29 12:05:26.182 GMT


    By Katie Linsell and Thomas Beardsworth
    * (Bloomberg) -- BNP Paribas SA traders started pitching derivatives trades that allow investors to lock in prices now on future bets that Rallye SA could default when it needs to refinance debt, according to people familiar with the matter.
    * The bank is circulating prices for so-called forward credit-default swaps on the indebted parent of French supermarket chain Casino Guichard-Perrachon SA, said the people, who asked not to be identified because the information is private. The trades insure Rallye’s bonds starting at specific dates in the future and may appeal to investors who believe the company has enough cash to avoid an imminent default.
    * Rallye is under pressure to repay at least 970 million euros ($1.1 billion) of debt by the end of March and a further 230 million euros of bank loans in 2020. Investors are concerned it may be unable to cover debt maturities because most of its credit lines require it to pledge Casino shares, which fell to a 22-year low this month.
    * “Given Rallye’s current liquidity, debt maturity profile and Casino share price, there should be no problem in 2019 but the question is: will it be sustainable the following year?” said Anthony Giret, a credit analyst at Spread Research in Lyon, France. “The problem could happen in 2020 when Rallye has bank loans to refinance, so this kind of instrument makes sense.”

      Credit Lines

    * A spokesman for BNP Paribas in London declined to comment on the trades. Rallye’s Chief Executive Officer Franck Hattab said he’s “confident” in the company’s ability to refinance or extend bank loans and credit lines.
    * “We cannot comment on bank products, but Rallye has a strong liquidity position with more than 1.7 billion euros of confirmed and undrawn credit lines,” he said in response to questions about forward trades. “The average maturity of these lines is 3.6 years and, to maintain this liquidity, Rallye pays commitment fees on all the lines so that the 1.7 billion euros is fully committed.”
    * Hattab said in June that the company will cover debt maturities until at least the end of 2019 using existing credit lines and issuing new bonds. He said he didn’t foresee any difficulty accessing credit lines that require pledging Casino shares to draw down. Out of the 1.7 billion euros of undrawn credit lines, 1.4 billion euros require pledges as collateral, according to Rallye’s first half results.
    * Rallye’s ability to refinance its debts was brought into focus in June, after Barclays Plc analysts said Casino had “significantly negative” free cash flow and its parent may struggle to meet maturities. Goldman Sachs Group Inc. also released research at the time advising clients to sell Rallye bonds and buy five-year credit-default swaps.
    * Swaps on Rallye now imply a 27 percent chance of default within one year and a 76 percent probability within five years, CMA data show.
    Forwards might appeal to investors who only want insurance for a specific period of time. They’re usually structured by offsetting two swaps of different maturities, meaning protection kicks in after the shorter leg expires, according to Ulf Erlandsson, a portfolio manager at startup hedge fund Glacier Impact in Stockholm, which hasn’t done the trade on Rallye.
    * “The view might be that the company has cash lasting until a certain date, so default protection up until that date is not that valuable,” he said. “At some point -- for example a bond maturity/redemption -- you might have a liquidity crunch and a lot of people want to own protection for that point in time.” Swaps also cost less the further in the future they start.
    * The upfront payment for one-year protection starting in two years drops to 10 percent, or 1 million euros on 10 million euros of debt, from 13.5 percent beginning now, according to BNP Paribas prices sent last week.
    * “It saves you some costs if you have the conviction that you only need to be protected from year two onwards,” said Ulrich Von Altenstadt, the Munich-based managing director at XAIA Investment GmbH, which also hasn’t bought forwards on Rallye.

    To contact the reporters on this story:
    Katie Linsell in London at klinsell@bloomberg.net; Thomas Beardsworth in London at tbeardsworth@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

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    (BN) Altice Europe Markets Bonds After Raising $2.5 Billion in Loans (July 2018)


    Altice Europe Markets Bonds After Raising $2.5 Billion in Loans
    2018-07-16 13:30:44.999 GMT


    By Katie Linsell
    (Bloomberg) -- Altice Europe NV is seeking to raise about $2 billion in the bond market after obtaining $2.5 billion in new eight-year loans in a plan to get billionaire Patrick Drahi a step closer to tackling a debt load that has spooked investors.
    The Amsterdam-based company plans to sell $1.25 billion of bonds denominated in dollars and 650 million euros ($761 million) of bonds in the single currency, according to a person familiar with the matter, who asked not to be identified because the information is private. As the latest in a string of moves to shore up its finances, the loan refinancing strengthens Altice Europe’s liquidity profile, it said in a statement Monday before news of the bond sale had emerged.
    Investors dumped Altice stock last year over concerns that it couldn’t maintain its debt, which stood at about 32 billion euros at the end of the first quarter. The company has put the brakes on acquisitions, spun off its U.S. unit and is pursuing asset sales. It said last month it will raise 2.5 billion euros in cash by selling stakes in transmission towers in France and Portugal.
    “Altice Europe is back for the first time in the bond market since October and will be testing investor confidence since the big selloff of last year,” said Jean-Rene Meduri, an analyst at Spread Research in Lyon. “The term loan new issue that went smoothly last week paved the way for further refinancing.”
    Altice Europe shares fell 0.4 percent to 3.15 euros at 3:29 p.m. in Amsterdam.

      Maturity Wall

    Altice Europe plans to use the new loan proceeds to pay back a portion of its French unit’s $4 billion in senior secured notes due May 2022, according to the statement. The proceeds from the bond sales will also be used to redeem a portion of notes due in 2022, people familiar with the matter said on Monday.
    The company is facing a wall of maturities, with more than 8 billion euros of debt due in that year alone, its latest earnings presentation shows. Between now and then it has more than 2 billion euros of debt due for repayment, the filing shows.
    The phone and cable company initially sought to raise $2 billion from investors in the new loans, according to people familiar with the matter last week. After increasing the margin on the loans it was able to boost the size to $2.5 billion, said the people, who asked not to be identified because the matter is private.

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net; Rebecca Penty at rpenty@bloomberg.net Kim Robert McLaughlin

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