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StockBeat: Europcar Runs out of Road, but not Everybody's Hertz

Stock MarketsSep 08, 2020 05:33AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- The rotation to cyclicals – if indeed it’s coming at all – has come too late for Europcar (PA:EUCAR).

The French-based car rental firm said on Tuesday it’s seeking talks with creditors on restructuring its debts, in an effort to stop following its larger and more famous peer Hertz into bankruptcy.

Europcar stock fell as much as 30% on the news, while its bonds due in 2024 and 2026 fell as much as 13 points, to trade around 37% of face value. If that’s all the bondholders think their investment is worth, then current shareholders, first and foremost French investment firm Eurazeo (PA:EURA) - are looking at a very negative outcome. 

Eurazeo’s stock fell 2.6% by 5:15 AM ET (0915 GMT), although that wasn’t much more severe than the broader market decline on a morning when Europe braced for more selling of U.S. tech stocks after the long Labor Day weekend.  The French CAC 40 fell 1.0% and the STOXX 600 fell 0.9%, undoing most of Monday’s gains.

The confirmation by Eurostat that Eurozone gross domestic product shrunk by an eye-watering 11.8% in the second quarter of the year – markedly worse than the performance of the U.S. economy - hardly helped sentiment.

Aside from the usual expressions of confidence in emerging from the current crisis stronger than ever before, the standout sentence in Europcar’s press release was the following, which underlined the difficulty of the road back to health for the travel sector in the wake of the pandemic.

“What has been seen across the board in the travel and leisure sectors this summer demonstrates that the recovery of these industries to pre-Covid levels will be very slow. Furthermore, as Covid-19 continues to be present throughout the world, the timing of the recovery remains highly uncertain.”

Trying to rebrand themselves as mobility service providers hasn’t changed the reality that firms like Europcar still depend overwhelmingly on plain vanilla car rentals, and that the majority of that business is based at airports. Such business fell by as much as 90% during the second quarter.

Hopes for a quick rebound have been dashed by the clear evidence that increased tourist travel has gone hand in hand with the resurgence in Coronavirus cases during the summer. Easyjet stock fell 6.3% after it was forced to trim its flight schedule for the quarter after the U.K. government put a handful of popular Greek islands back on its list of high-risk destinations.  

And yet it would be wrong to tar all car hire firms with the same brush. As has been so often the case, the pandemic has merely hastened the demise of a company that had already started 2020 in trouble. German rival Sixt  (DE:SIXG), by contrast, is down only 12% year-to-date thanks to its stronger balance sheet. With cash of over 814 million euros and short-term debt maturities of only 380 million, it looks much better placed to ride out the current storm and survive until cyclicals return to fashion.

StockBeat: Europcar Runs out of Road, but not Everybody's Hertz
 

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Comments (3)
Andre Viparich
Andre Viparich Sep 08, 2020 6:21AM ET
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babadation
Jan Skilbrei
Jan Skilbrei Sep 08, 2020 6:13AM ET
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states Depth, super rich Paul McCartney, Bezos, Saudi princes, oligarchs, we must all demand them to give charity to poor souls, they are partly, and complete, Thiefs, new world order,; Ask them
Camaro Camero
Camaro Sep 08, 2020 5:52AM ET
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Everybody Hurts R.E.M. When the day is long and the night, the night is yours alone, When you're sure you've had enough of this life, well hang on. Don't let yourself go, everybody cries and everybody hurts sometimes. Sometimes everything is wrong. Now it's time to sing along. When your day is night alone, (hold on, hold on) If you feel like letting go, (hold on) When you think you've had too much of this life, well hang on. Everybody hurts. Take comfort in your friends. Everybody hurts. Don't throw your hand. Oh, no. Don't throw your hand. If you feel like you're alone, no, no, no, you are not alone If you're on your own in this life, the days and nights are long, When you think you've had too much of this life to hang on. Well, everybody hurts sometimes, Everybody cries. And everybody hurts sometimes. And everybody hurts sometimes. So, hold on, hold on. Hold on, hold on. Hold on, hold on. Hold on, hold on. (repeat & fade)
 
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