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Euro vs. Sterling; Walgreen flat (£25s cheap) & Mobico steep (£28s rich, sidelines on €31s)

CONSUMER CYCLICALS

Euro (darker shade) and sterling (lighter) IG consumer curves below with £ swapped to Euros (Z spread).


  • We mentioned Walgreen £25s (Ba2/BBB- Neg) looked cheap vs. €26s and it screens that value on XCCY as well. Reminder reports are Boots IPO called off for now but ongoing discussion with PE firms.
  • Regardless £25s only has $2b in debt ahead of it vs. ~$5b for the €26s (WBA has front-loaded maturity profile).
  • Ex. hedging costs/in local currency the £25s yield 6.1% vs. 4.3% on €26. Should be for those with appetite for HY ratings/S&P lagging (our opinion). Also note comparison fair given 3-month par calls only (fallen angel).

  • We also mentioned Mobico £28s (Baa3 Neg/NR/BBB- S) looking rich - again seems to hold on XCCY with a steep curve. Mobico is a tough co to like with business sale of the North American bus business to shore up liquidity still not complete and the pro-forma BS impact uncertain.
  • The £28s gives 5.85% while €31s 5.7%. We are still on the side-lines with the €31s and those in £28s should consider rotations into B&M28s or 30s (Ba1/BB+) with no spread give up or the new Burberry 30s that we see pricing wide of it tomorrow (it won't be cheap to us at FV though).

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