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ULFP update

19 May 2020 by jbchevrel

Unibail-Rodamco-Westfield’s (ULFP) is a Real Estate company operating shopping centres in Europe and the US. That CDS has been amongst the worst performers in the European IG market. Today for instance, that CDS was wider by +13bp while the Main’s NAV is tighter -3bp. ULFP CDS was wider around +40bp over the past week. Despite recent vaccine news, because the length and intensity of the COVID crisis remains unknown, ULFP is reluctant to tighten. Similar to Rolls Royce PLC, discussed in a previous post, ULFP CDS performs poorly both compared to cash and compared to stock. The explanation is probably similar that ROLLS, namely that HF/CVA buying flows on the CDS have been dominating the price action lately, while not so much happens in other asset classes. ROLLS CDS recent price action shows that it is hard to call ULFP an ‘overshoot’ looking at cash and equity. Indeed, ROLLS is in positive basis for quite some time, and it doesn’t seem to pressure CDS tighter just yet (today was another +13bp wider, marking another all-time high). The liquidity situation of ULFP is better (recent bond issues + available credit lines + headroom to cut capex + headroom to cut dividend). Indeed, back in early April, ULFP issued €1.4B (€800M of 2.625% 2030s and €600M of 2.125% 2025s) both trading at a premium now (100 1/2 and 100 1/4 area).