Carrefour reactivates the securitization market in the last blows of the pandemic. The distribution chain has launched securitization bonds for up to 2,000 million euros, guaranteed by its credit cards. And it is again betting on this type of debt, which it already placed in the Spanish market in 2017 and 2019 and does so through its subsidiary Servicios Financieros Carrefour.
In this case, the debt that it intends to sell on the market – and that will be exchanged in the Spanish fixed income markets, both AIAF and MARF – is guaranteed by the credit purchases made by Carrefour clients. However, the outstanding balance of the principal of the credits transferred to the fund during its term will not exceed 3,000 million euros.
The operation is coordinated by Banco Santander, BNP Paribas and Natixis. The securitization fund manager will be Intermoney.
The fact that Carrefour dares to launch the first major securitization bond of the year on the market is relevant. On the one hand, because it is a type of financial asset that is especially sensitive to the economic cycle. The 2008 crisis, in fact, was caused by the outbreak of this type of debt, which had packaged and placed on the market bonds that were backed by both credit cards and consumer loans and, especially, by mortgage loans. A cascade of bankruptcies in these underlying assets blew up the entire securitization bond market, which took years to recover. And it caused a real financial upheaval.
When the markets became aware of the severity of the Covid-19 and half the world was confined to cut its transmission, investors quarantined the lowest quality bonds, such as securitisations or high-risk debt. The fact that Carrefour’s finance company reopens this market in Spain gives a signal. The markets are confident that the crisis has passed.
In the issuance prospectus of the securitization fund, Carrefour Financial Services explains that it does not assume any responsibility in the event of non-payment by Carrefour clients and informs that the default rate in 2020 was 9.6%, lower than the registered a year earlier, when it stood at 9.78%.
But this bond faces another burning question. And it deals with its underlying, credit cards. It is the recent ruling of the Supreme Court that qualifies the interest charged for this type of card revolving as “usury”, which has led to an avalanche of customer complaints and a new regulation that limits the interest charged. In fact, among the risks mentioned in the issue, Carrefour recognizes that it is subject to a large number of consumer and loan protection laws, and a profuse judicial literature, which has resulted, he explains, in “a growing number of customer complaints, in particular with regard to the interest rate “charged.
Carrefour thus recognizes that the number of claims in 2020 was 1,054, with an estimated cost of 8.4 million euros, and that in the first four months of this year there were already 758, with an expected cost of 4.5 million.
Emissions of 7,000 million in 2021
The Spanish market has registered placements of securitization bonds so far this year for 7,203 million, according to BME data. Only the issue that Carrefour has launched, 2,000 million, is around a third of the total placed throughout the year. And equal to what was issued throughout the month of April. For the issuance of this type of bonds –which in this case are sold on the market and are not directly acquired by the underwriter banks themselves to reinforce their balance sheet– the STS certification launched by the EU has played an essential role. served to give investors assurance of the viability of the products they buy.