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European Retailers Go Shopping

20 June 2017 by lberuti

Together with their new bond issue at the end of May, COFP ( Casino Guichard Perrachon SA ) announced they were redeeming some of their existing debt. Yesterday, TSCO ( Tesco Plc ) followed suit and surprised the market by announcing a tender offer of some of its outstanding GBP, EUR and USD bonds. The buyback will amount to a maximum of GBP500mln and cover bonds maturing between 2029 and 2057, even though the main targets are TSCO’s $300mln 6.15% bond due in 2037 and their €600mln 5.125% bond due in 2047. Combined with GBP1.7Bln of bonds maturing in 2017, the gross debt reduction could amount to more than GBP2Bln for the fiscal year 2017/2018, and would add to the GBP1.5Bln cut achieved in 2016/2015. Since the tender announcement, TSCO’s euro denominated 2047 bond has tightened by roughly 30bps. It mechanically compressed yields of other maturities, and TSCO’s 5-year risk premium tightened by 13bps to 148bps tonight. It benefitted the whole sector in Europe, which, far from suffering from the Amazon effect which has rocked US retailers, trades at its tightest level of the year