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Accor (ACFP; NR, BBB- Stable, BBB- Pos)

CONSUMER CYCLICALS

Rating upgrade from Fitch looks likely. Accor is a name that's generally screened rich to us on the non-perps (26/28's) - we've comp'd it in the past to Booking.com flagging the Accor 26's had closed the discount & the 28's were only spread +15bps - Accor has underperformed since moving spreads to +10 & +23bps. On the 31's - its tightened 13bps since issuance earlier this month (it priced at our FV/with no NIC at +125) & now trades inside higher rated airlines like EasyJet. We wouldn't be surprised if it continues its move tighter (screens the cheapest on the curve), 26/28's still screen rich.

  • Fitch changed its outlook on Accor to positive. It's pointing to company leverage target of <3* & medium-term guidance for +9-12% EBITDA growth over 2023 to '27. It's also noted more diversified geographical exposure (something equity analyst flag as well) alongside offerings along different price points. It notes asset light business model as a positive.
  • Its final assumptions on headline are RevPAR growth at 3% CAGR over 2023-27, EBITDA growth >7% CAGR over the period - these seem in-line to conservative against market consensus, assumptions further down on cash use all look in line outside Capex - Fitch is assuming €250m this yr increasing to €300m/yr to 2027 - we see consensus (*11) looking for €300m this yr increasing to €370m.
  • It sees net leverage at 2.5* now & moving up to 3-3.2* as €3b is returned to shareholders (mgmt commitment is €3b in reruns to 2027). Upgrade is sustained leverage (adj. for variable leases) below 3.5* & FCF margin in low-to-middle single digits after dividends - currently at 2.2%.
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