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FCA Compression

15 September 2020 by jbchevrel

Fiat Chrysler Automobiles NV (FCAIM) is the global carmaker resulting from the 2014 merger, and whose brands now include Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, and Maserati, Ferrari having been spun off in 2016. FCAIM CDS outperformed most XO constituents today. The 5y contract is tighter by -20bp vs a meagre -1bp for average XO constituent. This move was helped by FCAIM agreeing to shrink a dividend tied to its merger with PSA Group (PEUGOT) by -€2.6 billion. The special cash payout to FCAIM shareholders will be reduced to €2.9 billion from €5.5 billion. That reduction will be partially offset by FCAIM getting a stake in French auto parts supplier Faurecia SE (EOFP). PEUGOT CEO Tavares will thus have more cash at hand. Today’s move on FCAIM CDS (-20bp) helps it catch up with better rated auto CDS including BMW (-0.5bp). As of today’s close, Ba2/BB+/BBB- FCAIM has retraced 86% of its COVID widening, while single-A BMW had already retraced 97% of it. This decompression COVID-to-date reflects the solidity of German premium carmakers vs FCA. FCAIM cash flow from operations has been in the area of negative -€3B in both Q120 and Q220. For comparison, the cash flow from operations at BMW and DAI have been maintained positive in both Q120 and Q220. Consequently, FCAIM free cash flow has been in the area of -€5B in both Q120 and Q220. For comparison, the free cash flow at BMW and DAI have been slightly negative as at Q120 (but less than €1B) and has strongly rebounded in Q220 (by more than €5B).