CPI Property Group - comment

CPI will need to regain an IG rating to issue new hybrids, but this will require two things at a minimum. Firstly, an LTV of 40% (currently 50%) will be necessary. This will require execution on the next €2bn asset sale programme, starting in 2025. Secondly, the agencies will want to see, a clear separation between the activities of the company and those of the main shareholder. The optics around that separation are more important than the numbers involved. With Vitek holding 85% of the equity and unlikely to want to be diluted, hybrids will be an important part of CPI’s financing armoury in the future.

The group made asset disposals of €1.2bn in 2024. Another €400m is underway. Cash levels of €1.5bn were inflated by the issuance of €700m in bonds in the quarter, with the subsequent €671m of bond buybacks completed after the quarter ended. 

In the Q3 update, the group highlighted the creation of a Vitek Family Office, the planned disposal of a yacht building company to Vitek and the dissolution of a showjumping team (employing two Vitek daughters. The rating upgrade is crucial to issuing fresh hybrids but will come too late for the €375m Hybrids due to reset in October 2025, so an exchange offer will be needed.