Clariane - One to Watch - Model Update
All,
Please find our updated analysis on Clariane here.
Note: Beta testers can check Clariane on the portal here.
Clariane has fixed its maturities, but not its cash flow. H1 26 showed the widest gap between tariffs and cost inflation since at least FY24, at €27m, more than FY24 and FY25 combined, and pre-IFRS 16 EBITDA rose 15% pro forma to €280m. The €1.56bn refinancing leaves nothing due before Oct-28, but net debt fell only €35m in H1, and the €300m capex programme leaves c.€50m of FCF after interest in FY27, just as the covenant steps down to 6.0x and France heads into a 2027 election that will set its tariffs. At 96.75 (7.6% YTM) the 2032s sit c.2pts above our c.94.7 fair value, so we stay on the sidelines.
Investment Rationale
We are not initiating a position at this stage, but Clariane is one to watch. The €500m 6.875% 2032s trade at 96.75 (YTM c.7.6%), about 2pts above our fair value of c.94.7. At that price, they assume a smooth ride through peak capex, covenant step-downs and a French election.
Fair value for the 2032s is c.94.7, about 2pts below market, and c.89.4 for the hybrid, about 5.5pts below. The upside is limited; even if the credit re-rates and the 2032s tighten to c.6.5%, they trade only a few points above par, capped by the call. A tariff or wage shock that pushes yields to 9–10% would take them into the low 90s and hit the hybrid harder. At 96.75 we are not paid for that asymmetry.
The operating trend supports the credit. H1 26 delivered the widest margin of pricing over cost inflation since at least FY24, and we forecast EBITDA rising from c.€630m in FY26 to c.€756m in FY28. That takes leverage, including the hybrid, from c.5.8x to c.4.6x by Dec-28.
Cash is the constraint. Management's €300m capex programme leaves just c.€50m of FCF after interest in FY27, against €3.3bn of net senior debt.
The macro backdrop is why we wait. Roughly half of revenue is publicly funded, France is c.43% of the group, and the 2027 election comes as French public finances are under pressure. On flat EBITDA, a French tariff freeze with wages +3%, or a one-year delay to German tariffs, would breach the covenant from Dec-28.
Key Conclusions
A DCF of the theoretical operating company (after paying property rent at a 6.6% cap rate on c.€2.43bn of owned real estate) implies a 6.0x multiple, and the PropCo adds c.€587m of equity after its own debt and partner stakes. Bondholders rely mainly on the OpCo.
Staff costs are c.60% of revenue, so every 1pt of uncovered wage inflation costs c.€34m of EBITDA. Wages against tariffs is the central operating risk.
Peak capex leaves FCF roughly break-even after coupons and dividends in FY27. It recovers to c.€200m in FY28 as capex normalises.
Leverage including the hybrid falls from c.5.8x in Dec-26 to c.4.6x by Dec-28 as EBITDA grows, comfortably inside the 6.25x test.
The covenant steps down from 7.00x to 6.00x by Jun-29. Including the hybrid and holding EBITDA flat, the cushion shrinks from c.17% to c.3%, only c.0.5pts of wage slippage.
Our SOTP gives €2.14/share, c.34% below the share price, with senior OpCo debt covered c.1.2x. c.85% of EV is terminal value, and the real estate protects equity, not bondholders.
Happy to discuss,
Eashan
E: ekapoor@sarria.co.uk
T: +44 203 744 7055