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Valeo (Baa3/BB+): Cross Asset

CONSUMER CYCLICALS

• Valeo equity has underperformed the wider autos sector significantly over the past year, including fellow BB+ French issuer Renault SA.

• FRFP is rated Baa3/BB+ Outlook Neg/Stable. RENAUL is rated Ba1/BB+ Outlook Stable, with the stated aim of returning to IG. Despite the outlook we don’t see elevated ratings risk for FRFP given leverage is low and trending down.

• FRFP credit curve currently offers no pickup to RENAUL having been as much as 50bp wider in January, currently at the tight end of the 6M range.

• We prefer RENAUL over FRFP bonds and these levels.

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