El Corte Inglés (CRTING; NR/BBB-/BBB-) Notes on the private co

€500m 7Y Mandate, FV to follow, pricing tomorrow

• El Corte identifies as a variety retailer with 74 department stores in Spain & Portugal, 194 grocery stores, 54 supermarkets and 168 fashion high street stores. Sales is 38% in Fashion & Beauty, 25% in Food, 11% in Home & 25% in Other. It compares the split to resembling Target or Walmart vs. single focused department stores and grocers.
• Co says its 1.1% of Spanish GDP with 550m total footfall and 12m credit cards issued (which it points out is ~25% of Spanish population). It says 80% of population live within 40min of one of its stores.
• In regards to brands it uses mix of concession, wholesale and a portfolio of 34 private brands. It has a financial services arm which it says is "de-risked through partnerships" (i.e. JV's with Banco Santander & Mutua). That has the above 12m in credit cards and 3.3m in insurance policies.
• 11% of its revenue is online and its CAGR'd that segment at 19% over last 2 years. It says it is a top 3 online retailer in the country and it has the normal full service delivery & click & collect services in that offering.
• It is asset heavy; 93% of stores owned and valued at €15.5b with group LTV at 13.3%. Portfolio characteristics include 87% in department stores & 75% concentrated in CBD's. It says "highly liquid" pointing to €660m it sold over last 4yrs all at ~10% premium to GAV.
• Both raters likes the RE ownership given source of cash when needed. S&P says valuation decline last year was ~3.1%/€500m. It also has non-operating assets of ~€1b.
• It has had a number of board and ownership changes recently - structure seems messy to us. S&P says concentration risk on Chairwoman who is also 2nd largest shareholder and chair of the co with largest shareholder and a member of founding family... Net S&P takes stated leverage policy and notes shareholder distribution flexibility there given noncore assets that could be divested.

• Revenue was €14.4b and at 7.5% margin left EBITDA at €1.1b.
• Headline revenue has CAGR'd +5.6% (LFL) over last 2 years which its attributing in part to strong recovery in travel. Margins have expanded 80bps from FY21, its saying on operating leverage (from headline growth) & cost savings. It notes improvement was in the face of the lower margin travel business increasing its share. We see travel currently at 15.6% of sales and 8.6% of group EBITDA (rest in retail).
• Above two drivers combined to leave EBITDA CAGR'd at 15.9%. Net income was €480m in FY23 that was down from FY22's €870m which it says was impacted by extraordinary items. It has increased from FY21's €120m. No FCF measures in roadshow but S&P had FOCF of €445m after capex investments of €480m. That was firm improvement on FY22's FOCF of €150m.
• Gross financial debt was €2.2b/2x levered and net of €0.15m in cash left net €2.1b/1.9x. It has a ceiling of net 2x. Asides are post issuance gross will move to 2.5x & it's excluding the 7% of portfolio on leases in debt metrics - we don't have a number on leases.

• UoP is GCP, its first issuance since IG and it adds "reference point of a future liquid public secondary credit curve" and "reduces reliance on the banking loan market", It has/will have €1.5b+ in loans - most of that due in FY26 & 29 but regardless expect supply seems to be message.
• S&P said last week that it co will use €150m of the raise to pay down tranche C debt - that is not what co has indicated in roadshow - not a huge mover for us regardless with that facility due in '26.
• It is a senior unsecured note, EoD (on non-payment), CoC, 3m par call, 100k denom.