For the fourth time in eight months, credit rating agency S&P Global has demoted Codere credit rating to CCC. This is after claiming that the operator is at serious risk of non-payment of its debts in the coming six months. This puts pressure on liquidity and agreements with creditors. The agency also noted that there is potential for restructuring or refinancing actions over the medium term, but Codere’s bonds have been trading consistently below par.

However, S&P stated that a conventional default could result from non-payment of interest or a liquidity crisis. Also, it stated that it understands Codere is arranging additional top-ups to boost liquidity, and the operator paid its latest bond payment in May. S&P also said specific defaults could happen through debt restructuring or refinancing initiatives, and when tested in September of this year, the operator will have breached its 4.1x net leverage covenant.

Therefore, on S&P Global’s long-term issuer credit rating and issue ratings, Codere and its €500m and $300m senior secured notes have now been demoted to CCC. The company will now depend on both favorable business and operating conditions in order to fulfill the terms of its liabilities as the CCC rating indicates very weak creditworthiness. The S&P could downgrade Codere to CC as the next step. This means awfully weak creditworthiness with the inability to fulfill the liabilities terms.

S&P Global also indicated that while the company also faces a potential liquidity shortfall or covenant breach if not adequately addressed, the negative outlook reveals their view that a default is gradually likely in the next six months and absent unanticipated favorable developments. In the past eight months, this is the fourth time that Codere had been downgraded. After growth in European markets was offset by currency fluctuations hitting the contribution from its Argentinean business, Codere revealed a 5.9% year-on-year decline in revenue for 2019 in February.


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