19 January 2016 by lberuti
Slightly more than a month ago, S&P published a full analysis on COFP ( Casino Guichard Perrachon SA ) confirming the company’s BBB- rating and Stable Outlook. It did not prevent its 5 year risk premium to jump wider during the subsequent weeks following Muddy Waters’ report, but at least investors thought the investment grade rating was safe for the time being. So it came as a shock when S&P put COFP on Watch Negative yesterday. The review will be concluded within 90 days and may result in up to 2 notches downgrade. The timeframe is probably what worries investors most. Even if COFP has announced recently a large and transformational deleveraging program, asking any management to sell a few billions worth of assets within a few months at top valuations when they face a downgrade which risks the stability of the entire corporate structure is a stretch. COFP’s 5 year CDS benefitted today from the better sentiment towards risk generally speaking and it retraced part of Monday’s move, but the path of least resistance appear to be wider at the moment.