EU CONSUMER STAPLES: CONSUMER STAPLES: ITM Entreprises; S&P initiates (x2)
(ITMENT; NR/BBB- Neg) (private co)
S&P singing some praise here, including making clear the differences to Auchan's hypermarket heavy exposure. It notes €750m bridge-to-bond facility of which €300m has been refi'd (29s) - together with ratings indicative of imminent supply. 29s may screen value for some (-17 today at +250) but is trading on high cash px. Hard to see it pricing with IG peers as long as Auchan remains ~distressed and it's own ratings on neg. outlook. Re. reporting clarity issues we flagged in the past; S&P coverage will help. It has annual reports public (half year for this year but unclear if that is the norm) and we will get monthly market share data (Kantar) alongside comp earnings from Auchan (half-yearly), Carrefour (quarterly) and Casino (quarterly).
- Does not consider the independent retailers under the cooperative (SLM) as part of credit assessment given "absence of cross-default, cross-acceleration, guarantees or cash pooling between SLM and the independent retailers" and fact "SLM does not provide ongoing financial support to underperforming independent retailers."
- Notes as an aside "average leverage of the independent retailers is lower than that of SLM."
- It has co's net 2.5x leverage ceiling translating to S&P adj. net 3.5x - co is currently at that (i.e. no headroom to rating threshold).
- When it came to issue we tagged net at 3.4x vs. reported 2.6x so in-line with above.
- Neg. outlook is to account for integration risk on the 294 acquired casino stores (UoP when it visited us was to fund the €1.9b acquisition). Reminder plan is to offload the stores to its independent retailers (it said at the time it may take longer than normal 6-months given number of stores - but had 89% pre-allocated already to members).
- S&P notes some risk around value received on above and if it will cover the €1.1b debt taken out
- It is also flagging potential for disagreement within the group given earnings from Casino acquisitions will only benefit a few members while the costs are integrated and shared by all.
- It notes hypermarkets only 13% of sales with the rest in Supermarkets - the difference in exposure allowing to grow market share over the last 6 years (vs. Auchan & Casino struggles). Also notes vertical integration with inhouse food production (something Auchan wants to leverage as well).
Financial reports; https://www.mousquetaires.com/investisseurs/rapports-financiers/ 
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
RATINGS: UK, Italy Affirmed by S&P; Scope Downgrades France
Recapping sovereign ratings actions today:
- S&P affirms Italy's Long-Term Local Currency Debt Rating at BBB, outlook remains stable
- S&P affirms the UK's Long-Term Local Currency Debt Rating at AA, outlook remains stable
- Scope downgraded France to AA- (from AA) with a stable outlook
- S&P did not affirm/update the ratings of Greece or the Netherlands as part of their semi-annual review of the sovereigns.
US FISCAL: Budget Deficit Rises As Interest Payments Soar
The US's September budget balance came in very close to expectations with a $64B surplus, just the 2nd monthly surplus posted in the 2024 fiscal year just ended (Monthly Treasury Statement here - PDF).
- For the fiscal year as a whole (Oct-Sep), the nominal deficit came in at $1.83T, equating to 6.4% of GDP - that's up from $1.70T in FY 2023 (6.2% of GDP).
- For the year, revenues rose by a little under $500B but outlays grew by over $600B. Notably, interest rose 29% to $1.13T (net $882B), with the net figure 3.06% of GDP: the highest since 1996. That came as the weighted average interest rate of debt outstanding rose 35bp on the year to 3.32%, while social security payments rose by $103B on higher cost of living increases and more retirees.
- The 2025 fiscal year deficit is not expected to be much changed as a percentage of GDP, though that could depend on the November election results.
- CBO director Phillip Swagel told MNI recently America has fiscal headroom in the near-term but spending is on an unsustainable track over the long-term (link).
MNI: US SEP TREASURY BUDGET $64.3B
- MNI: US SEP TREASURY BUDGET $64.3B
