30 November 2020 by jbchevrel
Accor SA (ACFP) is a France-based hospitality group. It operates through 3 divisions (Hotel Services, Hotel Assets, New Businesses). Hotel Services covers the activities of hotel management and franchise providing. Hotel Assets covers the owned and leased hotels activities, such as hotel design, construction, refurbishment, and maintenance. New Businesses offers digital solutions to independent hotels and restaurant owners, hotel booking services for companies and travel agencies, concierge services. Accor operates through almost 5,000 hotels. Today ACFP CDS was among the worst performing single-name CDS in iTraxx XOver index. The 5y contract is wider by +17bp on the day, closing a tad below the 170bp handle. We are still 50bp below Oct 23 closing level, Accor CDS having largely benefitted from the vaccine news which inundated the market in November. The reasons why we retrace from that trend tighter today include the fact that Accor has announced the issuance of Convertible Bonds due Dec 2027 for €500M. The proceeds of the issuance will be used by ACFP for general corporate purposes including but not limited to the refinancing of the senior bond maturing in February 2021, of which €550M still remain outstanding. The nominal unit value of the convertible bonds has been set at €48.12, corresponding to a premium of +65% above the reference price of Accor's ordinary shares. The convertible bonds will be issued at par and will bear interest at a rate of 0.70% payable annually. The 2021s that are to be refinanced have been pulling to par, most of this year. In March, a drop of -3.5pt had momentarily upset this trajectory. The refi-linked news were accompanied by a steepening of c20bp in 1s5s and 2s5s such that the 1y and 2y points are anchored, unchanged on the day. Before COVID and over the 2016-19 period, Accor 5y CDS traded mostly between 50bp and 100bp, reflecting the fact that management was committed to remain IG. Given Accor’s CF, debt and cash trends, it is fair to say that the company would still be IG without COVID. The cost of protection has almost halved since the March 300bp+ levels, and the pace of the recovery will largely depend upon consumers’ ability to travel.