February 25, 2021

The El Corte Inglés bond marks new records in the midst of disinvestments | Companies



Corte Inglés Bonus




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The listed bonds of El Corte Inglés, issued at the end of last year in Ireland worth 690 million euros, marked on the day of Tuesday new record levels of price and profitability.

This issue, due in 2024, yesterday placed its price at 105.27% of the nominal, above the 105.23% recorded on Monday and which also meant a record. On the other hand, the profitability of the securities, which evolved in the opposite of the price, fell again, down to 1.73%, below the 1.74% that marked on Monday. Since the listed El Corte Inglés debt fell below the 2% level earlier this month, its profitability has been touching new lows progressively.

Several factors explain this evolution. Although the trend was already similar in the dates prior to the publication of the 2018 results, they have confirmed the trend. The English Court reached in 2018 its greatest benefit since 2011, with a net profit of 258.2 million, an improvement of 27.7% over the previous year, which is equivalent to reaching the best level in the last eight years fiscal years . A key figure is the reduction of the company's debt, which contracted by 12% until the 3,367 million.

The divestment policy implemented by the company plays a key role in this contraction of liabilities, which aims to achieve the degree of investment to achieve more profitable sources of financing. In 2018 it received 342 million euros from the sale of six real estate assets, and the intention is to reach 1,000 million this year, which would reduce its net debt by almost a third. The sale of non-strategic real estate assets will be the main route. So far in the 2019 fiscal year, it is close to the 200 million raised in that process, after the sale of three stores: Bahía Sur (Cádiz) and Los Arcos (Seville), sold to Castellana Properties for 36.8 million, and that of Plaza Macià, in Barcelona, ​​known yesterday, for 152 million, its biggest divestment for a single asset.

The objective of El Corte Inglés is that the debt reach, at the end of 2019, a level of 2 times its EBITDA, by 2.9 with which it ended 2018. As they understand from El Corte Inglés, achieving that ratio would allow them to operate as if they had the degree of investment, although they recognize that the agencies will take time to recognize it, by including in their analysis not only the situation but also the previous financial trajectory. Currently, its rating is two steps below that level, according to the ratings of Moody's and Standard & Poors. Axesor did grant him the investment grade.

Another aspect that benefits him is the favorable wind that in the last days blows for the debt of Spanish origin, whose reference is a few government bonds whose profitability falls unchecked. Yesterday the 10-year Spanish bond fell for the first time 0.3% while the seven-year debt went into negative territory for the first time in history.

The spread between the Spanish five-year debt (term of the El Corte Inglés issue) and the debt of the distribution group is 208 basis points, lower than at the beginning of June (when the spread was around 216 points) and some 50 basis points below the differential of 254 reached in January. However, in the last sessions the debt of El Corte Inglés has not been able to keep pace with Treasury bonds, so this differential has risen above the levels of two weeks ago.

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