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26 March 2019 by jbchevrel

Boparan Finance PLC (BOPRLN) has been the worst performing retailer in CDS space, year to date. Indeed, its 5y CDS is wider by +50bp. Fundamentally, wage and food inflation (ex: feedstock +3.5% yoy) continue to squeeze margins while price increases are longer to come. That was reflected in Q1 (FY 18/19) results, with EBITDA at £24m vs £28m previous year (-14% yoy) and Q2 results are widely expected to be in line with Q1. Credit picture looks weak, net leverage is c7x if you exclude pension liabilities, c10x if you include them. BOPRLN has 3 issues, £ 5.25 19s £ 5.5 21s € 4.38 21s. The £ 19s are seen as likely to be repaid (expiry in July). With liquidity of just £160M and the £174M 19s going to expire, both the 21s and the CDS could come under more pressure. If the company survives that period, things would have had to improve, therefore the CDS curve is inverted from 3y (June 2022) onwards.