Itelyum : We are initiating a Buy recommendation on the new 2030 bonds

Yesterday, Itelyum completed the issuance of €725m bonds maturing in 2030. The FRN tranche was dropped and the entire outstanding amount was transferred to the fixed-rate tranche. In addition, the size of the issue was increased by €25m compared to the €700m originally planned. The yield on these new 2030 bonds (5NC2) has been set at 5.75%, at the lower end of the guidance (5.75%-6%) which had already been revised downwards (‘6.25% area’ initially). We initiate coverage with a Buy recommendation on these new ITLYUM 30 bonds, which have a good risk/reward profile. These have been priced in line with our fair value of 5.75/6.0% estimated yesterday in our Issuance Focus.
Our Credit Opinion is stable. We find that Itelyum has a reassuring credit profile in the single-B credit universe, operating in rather resilient and profitable markets. Its high level of indebtedness (reported leverage ~6x, ~4.5x pro forma), which is unlikely to decrease much given its growth strategy, combined with its still relatively modest size and activities that are still largely concentrated in Italy, nevertheless mean that the group should retain its current credit ratings, B2/B, in the medium term.