Elo/Auchan (ELOFR; NR, BB+ Stable); Pricing

Balance of risks deal screens attractive; coming wide with 80bp NIC on IPT, sizeable pick up in secondary against (IG) comps, basis moving up but still negative (5Y -35), 1y spread roll down is 50bps, yield roll-down still positive at 30bps. Mian downside is recovery in operating performance still not there.

• Step-up from Carrefour (2-notches at BBB) +200bps. Step up from VF (BBB- Neg) its still +70bps - VF has similar (concerning) operating performance issues on top of liquidity issues- turnaround expected but not yet here.
• Note ratings for Elo already account for the RE asset base & predictable cash flows from it - S&P sees retail arm leverage at 2* at the end of this yr vs. 8.4* for NIH (RE has less stringent financial triggers) - its giving it a one-notch uplift from anchor BB on weighted average credit basis.
• On this note only curve that we find screening more value is the Aroundtown Seniors (NR, BBB+ Neg) spread +70bps wide on the 4yr. ARNDTN does have lower quality RE assets & our screen cheap view on it was focused in short-end/a liquidity play; the July 26's have come in 50bps & now not far from Elo.

We see FV at MS+250 or 5.3%. IPT is at 6.125% or +330, NIC currently is 0.8%/80bps, 3-month par call on new issue is standard on its existing lines.