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International Distribution rises on HSBC upgrade; € 26's & 28's seem to price downgrade

CREDIT UPDATE

* International Distributions (NR, BBB Neg) (owner of Royal Mail) is the best performing equity in our €IG basket on a reported upgrade to buy from HSBC analyst Achal; "company should be able to implement structural changes that could result in “significant financial benefits” over the coming years after sealing a three-year agreement with the Communication Workers Union and progressing its new automated parcel sourcing hubs" (bbg, HSBC)

* Its bonds are 1-2bps tighter (including its £ 30's), it was affirmed at BBB Neg by S&P in August '23 but has been on neg outlook since Sept. '22. It's € 26's & 28's at Z+124 & +179 look to be pricing a potential downgrade/trade wide to BBB names.

* It comes a day after reports Rishi Sunak would not allow Royal Mail Saturday deliveries to be scrapped; "strong view” that Saturday deliveries “provide flexibility and convenience” for customers and that he would not allow them to be scrapped." (Downing street)

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