Research Update: Accor S.A. 'BBB-' Rating Placed On CreditWatch Negative Given COVID-19's Expected Effect On Earnings And Credit Metrics

We now believe that travel and other restrictions due to COVID-19 will likely result in a more significant impact on hotel group Accor S.A.'s earnings and metrics in 2020 and 2021 than originally anticipated. This is because, based on our expectations that demand for hotel rooms is likely to fall by at least 50% in 2020 and 30% in 2021 compared to 2019 levels, we think Accor's cost base remains too high for such a low capacity utilization, thereby resulting in significant negative EBITDA in 2020. In our view, further measures are needed for Accor to restore its credit metrics. Given the pandemic's greater-than-expected impact on Accor's earnings and metrics, and the uncertainty regarding the timeline and degree of any

...- We now believe that travel and other restrictions due to COVID-19 will likely result in a more significant impact on hotel group Accor S.A.'s earnings and metrics in 2020 and 2021 than originally anticipated. - This is because, based on our expectations that demand for hotel rooms is likely to fall by at least 50% in 2020 and 30% in 2021 compared to 2019 levels, we think Accor's cost base remains too high for such a low capacity utilization, thereby resulting in significant negative EBITDA in 2020. In our view, further measures are needed for Accor to restore its credit metrics. - Given the pandemic's greater-than-expected impact on Accor's earnings and metrics, and the uncertainty regarding the timeline and degree of any recovery, we are placing our '###-' ratings on Accor and its debt on CreditWatch with negative implications. - The CreditWatch placement reflects the possibility of a downgrade over the next few weeks or months, if we believe that the mitigating measures adopted were...

Research Update