EU CONSUMER STAPLES: Auchan: Capital Structure Change - Summarised

Elo/Auchan; debt-pushdown/consent required for change of issuer
(ELOFR Unsec: NR/BB-)

The 27s, both 28s and 29s (total €2.9b in debt) are being requested to approve a change in issuer form HoldCo ELO, to the RE arm, New Immo Holding. Parent ELO will retain the €1b Jan-26s. If consent received, substitution expected to be completed by September.

New Immo/the RE arm has €7b of real estate (+1.4% LFL last yr), LTV of 35% (€2.9b of debt, €2.5b of which is intercompany loans pushed down from ELO), interest cover of 4x, vacancy of 4.5%. Turnover of €650m (9.2%y), EBTIDA on 55% margin. S&P had standalone rating of New Immo at BBB. 

Elo/Auchan; debt-pushdown, Moody's initiates at Ba1 

Auchan, the worst performer from consumer last year, is being sorted out today -> back around par, +7-8pts.  When we spoke to company back in October it said a spin-off of the RE arm was not being considered given it required close operational ties to remain to reduce hypermarket space in retail. To benefit of credit, that has changed. The idea was first floated at FY results/late Feb - but without detail.

Moody's expects:

• NIH/RE arm will become financially independent from ELO, hence limited future distributions. Notes since 2019, despite links, no cash transfers occurred to ELO or Auchan.
• NIH cap. structure to remain largely unsecured.
• Pushdown to be completed by end of Sept 2025 (in-line with company guidance).
• LTV of 45.7% post pushdown and to fall to 44.5% in 1-1.5yrs. Sees this comfortably positioned in Ba1 category.
• Indirect exposure to Auchan performance to remain; "most of NIH assets are anchored around Auchan stores". We have noted in past of the 224 sites, 200 have Auchan retail. Notes not direct rental exposure but influences tenant demand/footfall. As aside, mgmt has noted in past re. rental dependency, no client makes up more than 2%.
• Excludes €1.6b in off-balance-sheet commitments that are fist-demand guarantees across 12 JVs. Moody's excludes as they are tied to assets whose values exceed commitments, no history of guarantees being called and JVs actively managed by New Immo.

Elo/Auchan; debt-pushdown, S&P will not rate 

The BB- rating it is withdrawing was before the financial separation announced today (i.e. rated at Holdco/ELO level, full consolidating RE+Retail). Standalone was BBB but perhaps S&P was not as lenient as Moody's on the separation/remaining links.

Elo/Auchan; debt-pushdown, investor call 

The earnings call will go for some time, but presentation available, skip ahead to slide 50 that reiterates:

• NIH will be "financially independent from ELO".
• intragroup loans (last reported €2.5b) will be removed and "commitment from AFM to prevent special cash distributions from NIH". AFM here refers to owner Association Familiale Mulliez.
• All other financial policies, including ceiling LTV of 40%. is in-line with what Moody's had when it initiated this morning.

Please note there is a "planned execution of a €415 million mortgage loan or a senior unsecured bond" (Moody's) in the 'coming weeks' (mgmt). This will be issued under new entity/NIH - equal to the transferred 27-29 bonds.

Re. how Auchan/retailing arm is doing - not well (LFL -1.4%, France -3.1%), with gross margins -30bps but offset by opex improvement. That left EBITDA margin unch at 1.1%. FY guidance is for €1b of EBITDA (vs. €0.9b LY) - the acquired casino stores is adding to cash lease expenses (likely to over €400m this FY) and dragging on capex (this half was €250m). Taken together likely to leave it still negative on FCF for FY25.