S&P Downgrades Accor To Junk Status

By Dave Simpson
S&P Downgrades Accor To Junk Status

Hotel group Accor has been downgraded to junk status by ratings agency S&P Global, which is a decision that is set to cost the company tens of millions of euro in additional interest payments, as travel restrictions dim the outlook for the operator of Ibis and Sofitel hotels.

S&P cut Accor's credit rating to 'BB+' from 'BBB-', and left it with a negative outlook.

"We now anticipate weaker earnings and debt metrics in 2020 and 2021," S&P wrote, citing the effects of the COVID-19 pandemic on travel and the economy in general.

The decision strips Accor of its investment grade status, even though it has a BBB- rating with Fitch, and means that it will have to pay additional interest on some of its debt.

A company spokesperson confirmed that there will be a so-called "coupon step-up" of 125 basis points on a number of its bonds with maturities spanning the February 2022 to February 2027 period.


This means that Accor's interest bill will rise by approximately €82 million over the period, according to Reuters calculations - a figure that the company confirmed is broadly accurate.

It is not unusual for companies to include coupon step-ups to placate investors worried about a downgrade to junk, which can cause bonds to fall in value as they are booted out of widely-tracked investment-grade indices.

The number of companies or countries at risk of having their credit ratings cut has been pushed to an all-time high by the pandemic, an S&P Global analysis showed in May.

First-Half Loss

Accor posted a first-half loss of €227 million and said that it plans to cut 1,000 jobs as it seeks €200 million in annual cost savings.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.