30 July 2020 by lberuti
US car rentals which were denied a bailout from Washington, and that was one of the reasons Hertz filed for bankruptcy in late May. In contrast, EUROCA ( Europcar Mobility Group ), a French company, was able to tap state-backed loans. That might not be enough though. On Tuesday, it reported a first-half loss of €286mln and warned its existing structure “weighs on its ability to ensure a proper path to recovery”. It is therefore evaluating “short and long-term alternatives” to address its capital structure and “liquidity constraints”. It has €1.7Bln of debt, including €320mln of state guaranteed loans and excluding vehicle related borrowings, but only €400mln of unrestricted cash. The best hope for EUROCA’s stakeholders would be that someone makes a bid for the company. Eurazeo, which still owns 30% of the equity, is looking to exit its stake and VW ( Volkswagen ), which sold EUROCA to Eurazeo for €1.3Bln in 2006, is exploring an offer for its former subsidiary, according to a Bloomberg report published last month. Eurazeo’s patience is allegedly wearing thin though, and they said at the beginning of the week that they want any deal to happen before September. Absent a takeover offer by that deadline, EUROCA looks to be heading for a financial restructuring, which would crystallise debtholders’ losses. Because of this dire prospect, the good run of EUROCA’s risk premium came to an abrupt halt and 5-year CDS referencing the company traded up from roughly 10pts upfront on Monday to 41pts upfront at the close tonight. Insuring $1 of EUROCA’s debt now costs you 40cts upfront plus an annual fee of 5cts.