Accor : Accor remains on course

Like last year, Accor was among the first issuers to tap the bond market after the summer break. Late August, the group issued a new € 500m seven-year bond, which will be used to meet the next bond repayment due in early 2026. We avail ourselves of this opportunity to review the issuer and fine-tune our recommendations on the bonds.
We reiterate our Stable credit opinion on the issuer. Now that the covid crisis is long behind it, Accor's debt has moved back to levels consistent with its financial policy, which has always been to comply with the requirements for an investment-grade rating, and we see no reason why the group should change its strategy further out. This is particularly true given that, with its ability to generate more than € 500m in recurring free cash flow annually, Accor should have adequate leeway to reward its shareholders comfortably and further expand its network, while stabilising its financial situation at current levels. For example, according to our estimates, even using half of recurring FCF to pay out dividends and buying back € 3bn worth of shares until year-end 2027, Accor should still be able to maintain adjusted leverage, according to S&P calculations, of 3.0x-3.3x and adjusted FFO-to-debt of 20%-25%. However, as these distributions exceed the free cash flow that the group is expected to generate over the period, this implies that Accor's net debt is set to increase further by around € 0.5bn annually in the coming years and that these needs will be financed on the bond markets. This is exactly what has taken place this year, with two bond issues totalling € 1.1bn vs. € 600m repayable in early 2026.