Europcar - S&P downgrade

All,cS&P decided to downgrade Europcar to CCC+ with a negative outlook. The agency contends that sales could drop by -50% this year and that recovery in 2021 might only reach 75% from today’s perspective. As a result, S&P express doubts over the financing and liquidity of Europcar. Well spotted.

Our own model assumes a more dramatic fleet reduction this year, with revenues dropping -63%. For next year however, we have revenues re-building to 85%. On that basis the company is not running out of cash not least because of the E320m g’teed facilities the company has picked up. 

Positive news in recent days included the prolongation of the French furlough scheme to October, which allows for critical cost management over the summer. The Spanish scheme is slightly less favourable, but enshrined in law via a reference to Force Majeur and therefore longer lasting. Germany is the company’s largest market and has the least favourable scheme. But its also the first major European market out of lock-down. 

So we don’t find the timing of the downgrade quite in sync with events and if anything - having modelled the fleet financing - are more constructive on liquidity. One big question will be the return of international air travel, which for now seems far off. But we have no doubt that the majority will return within the next two yers and liquidity appears sufficient for that.

We are holding on to our position. 

Wolfgang