Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Seven & i is rated A2/A (¥ & $) but there are reports this morning a sizable cash component will be needed to get deal done...in which case we are looking at hit on pro-forma leverage.
Seven & I was levered circa net 2.5x running a 9% EBITDA margin while Couche is low 2x levered running a 8% margin. Combined they will generate €140b in sales and €12b in EBITDA. 1-turn of leverage of €12b compares to seven & i's market cap of €35b. Moody's was happy for Couche to run leverage above gross 3x for acquisitions periodically and went as far as saying $13b in debt capacity before exceeding its 3.5x gross threshold on Baa1 ratings (in late '23, post-TE gas station acquisitions). We expect similar leniency on this deal, extent of downgrades dependent on that cash component but we don't expect HY ratings in near-term.
We are watching how Couche equities open in Toronto later today - weakness might signal expectations for dilution on equity financing. Reminder this is still not done deal; FT is reporting seven and i has been working hard to fend off potential acquirers but changes to Japanese rules makes it harder for it to defend/ignore the offer now. Unclear if it will have trouble with regulators as well; this is number 1 (7/11 including Speedway banner) and no. 2 (Circle-K banner under Couche) in US gas station retail.
CoC at $101 on the $ lines, we can't find prospectus to confirm if the standard HY rating downgrade required (in which case seems unlikely). All its $ bonds do trade below par.
Notes from earlier here
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.