10 November 2020 by jbchevrel
Unibail-Rodamco-Westfield (ULFP) is a global developer/operator of shopping malls. ULFP has a portfolio valued at €58.3B as of Sep30, of which 86% was in retail, 7% in offices, 5% in convention & exhibition venues and 2% in services. They own 89 shopping centers (such as London Westfield and Carrousel du Louvre in Paris), including 55 flagships in the most dynamic cities in Europe and the US. Their centers welcome 1.2B visits per year. The COVID pandemic caused some tenants to stop paying rent, others to seek lower rates. Thus why, ULFP was particularly hard hit. The 5y CDS peaked at 320bp during spring. Today was the much-awaited day for (or against) an equity issuance. And it was against. Activist investors at ULFP have blocked the company’s plans for a €3.5B capital increase and won seats on its board. That translated into a wider CDS. the 5y spread is wider by about 20bp on the day, as that development is a bad news for credit, along with being a good news for equity (+21% on the day, so +50% since Friday’s close). The required two-thirds of shareholder votes has not been achieved. Apparently, more than 50% was in favor but not the two-thirds. Activist shareholders (French telco billionaire Xavier Niel and RE investor Leon Bressler) who had campaigned against the capital increase, will join at the next board meeting. That cuts out one of the key options for ULFP to raise €9B in order to shore up their balance sheet, according to the plan that they announced in September. The plan also included selling €4B in retail and office properties in Europe, a dividend cut and cost cuts. The plan intends to cut the company’s €24B debt load, most of which was taken in 2018 Westfield deal ($24.7B). ULFP will now look for other options to cut debt, including more asset sales.