Aroundtown (ARNDTN: NR, BBB+ Neg) {AT1 GY Equity}

Spreads (4-10bps tigher) may have room to continue, particularly on short-end that still trades well wide, headwinds in year ahead are higher hybrid reset coupons & the higher cost of debt on €1b bank facility (€900m already drawn at 1.4%+3m). For S&P (on neg-outlook) only numbers that may alarm it are devaluation of 11% - it was looking for 7-8% in FY23 and saw -2% this year.

• ARNDTN lines trade well wide even on the short-end (<3yr), morning moves might have legs given mgmt efforts on boosting liquidity through disposals, buybacks of bonds at discount, tight capex (€395m is nearly half of FY22) & divvy cuts. These measure helped boost cash by €330m & is net/after €1.1b in bond buybacks. Gross debt is €14.2b, net €11.2b.
• For reference property valuations fell by 14% since June '22 yet LTV has only increased 3% helped by above. Mgmt seems confident on liquidity covering near-term maturities yet May 26's still at Z+200 & July +244.
• S&P notes differences between its hybrid and mgmt reported (100% equity) treatment - it saw 2023 hybrid non-calls driving company hybrid with no equity treatment to €1.48b (vs. total €4.7b) and adding 2-3% to debt to debt+equity ratio. It still sees the decision as logical given reset rates on hybrids << newly issued hybrids.
• It expected the divvy cut, €1.3b (actual €1.1b) in bond buybacks at 20% discount & €900m (actual €1.2b) asset disposals. It is looking for €500m of asset disposals this year. ERPA Occupancy at 92.1% continues to be at low end of S&P expectations for 92-93% - S&P sees it staying flat here for next 2yrs.