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ACCOR

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Real-time Euronext Paris  -  05/25 11:35:17 am EDT
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Hotels group Accor faces higher interest cost after S&P downgrade to junk

08/18/2020 | 09:10am EDT
FILE PHOTO: Accor headquarters in Issy-les-Moulineaux

Accor has been downgraded to junk status by ratings agency S&P Global, a decision set to cost the company tens of millions of euros in additional interest payments, as travel restrictions dim the outlook for the operator of Ibis and Sofitel hotels.

S&P cut Accor's credit rating to 'BB+' from 'BBB-' and left it with a negative outlook.

"We now anticipate weaker earnings and debt metrics in 2020 and 2021," S&P wrote, citing the effects of the COVID-19 pandemic on travel and the economy in general.

The decision strips Accor of its investment grade status, even though it has a BBB- rating with Fitch, and means it will have to pay additional interest on some of its debt.

A company spokeswoman confirmed there would be a so-called "coupon step-up" of 125 basis points on a number of its bonds with maturities spanning the February 2022 to February 2027 period.

This means Accor's interest bill will rise by around 82 million euros over the period, according to Reuters calculations; a figure that the company confirmed was broadly accurate.

It is not unusual for companies to include coupon step-ups to placate investors worried about a downgrade to junk, which can cause bonds to fall in value as they are booted out of widely-tracked investment-grade indices.

The number of companies or countries at risk of having their credit ratings cut has been pushed to an all-time high by the pandemic, an S&P Global analysis showed in May.

Accor posted a first-half loss of 227 million euros and said it planned to cut 1,000 jobs as it seeks 200 million euros in annual cost savings.

Its shares were trading broadly flat at 1300 GMT, while some of its bonds jumped in anticipation of the extra coupon payments. The January 2024 bond rose 1.28 cents on the euro to a cash price of 97.99, its highest since mid-March. <FR0013233384=>

($1 = 0.8399 euros)

(This story corrects paragraphs 1 and 6 following clarification from the company on coupon payments.)

(Reporting by Sudip Kar-Gupta and Abhinav Ramnarayan; Additional reporting by Thyagaraju Adinarayan; editing by Jason Neely, Kirsten Donovan)

By Sudip Kar-Gupta and Abhinav Ramnarayan


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
ACCOR 0.55% 29.33 Real-time Quote.3.09%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.11% 0.6639 Delayed Quote.3.86%
CANADIAN DOLLAR / EURO (CAD/EUR) -0.03% 0.729778 Delayed Quote.5.14%
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Financials
Sales 2022 3 232 M 3 451 M 3 451 M
Net income 2022 124 M 132 M 132 M
Net Debt 2022 2 129 M 2 273 M 2 273 M
P/E ratio 2022 70,6x
Yield 2022 0,87%
Capitalization 7 543 M 8 055 M 8 055 M
EV / Sales 2022 2,99x
EV / Sales 2023 2,48x
Nbr of Employees 14 466
Free-Float 73,3%
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Mean consensus OUTPERFORM
Number of Analysts 20
Last Close Price 29,33 €
Average target price 34,34 €
Spread / Average Target 17,1%
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Managers and Directors
Sébastien Marie Bazin Chairman & Chief Executive Officer
Jean-Jacques Morin Deputy CEO & Chief Financial Officer
Floor Bleeker Chief Technology Officer
Sophie A. Gasperment Independent Non-Executive Director
Iris Knobloch Vice Chairman
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