Codere Tumbles to Record Low on High Default Risk: Madrid Mover

Codere SA, the Spanish gambling company that last week reported its worst earnings in more than two years, sunk to a record after Moody’s downgraded its credit rating on concern it may default on loans by the end of June.

Codere fell 22 percent to 1.30 euros at the close of trading in Madrid, the biggest drop and the lowest closing price since it began trading in 2007. The stock was the second-worst performer in the Madrid Stock Exchange General Index.

“The key to the stock lies not so much in its estimates but rather in the many risks it faces and the few opportunities available,” Javier Esteban, an analyst at Banco Sabadell, said today in a note to investors. He kept a sell recommendation on the stock.

Codere, which depends on Argentina for more than one-third of its revenue, reported a 21 percent drop in first-quarter earnings after an anti-smoking law went into effect in that country. Earnings before interest, taxes, depreciation and amortization amounted to 62.1 million euros ($79.9 million), the lowest in 10 quarters.

Codere has yet to refinance a 60 million-euro senior facility that matures on June 15 and “is vital in enabling the company to continue meeting its obligations at the corporate level,” Ivan Palacios, the lead analyst for Codere at Moody’s Investors Service, said in a report.

Moody’s lowered Codere’s “corporate family rating” one grade to Caa3, nine steps below investment grade. It maintained a negative outlook on all ratings for the company, based in the Madrid suburb of Alcobendas.

Lower Forecast

Codere, which operates gambling rooms in countries such as Uruguay and Mexico, lowered its 2013 Ebitda forecast last week to 270 million euros to 285 million euros, from a range of 285 million euros to 300 million euros. A new gambling law expected in Mexico is also adding uncertainty, Esteban said.

Of seven analysts who report their recommendations to Bloomberg, five advise selling the shares, while two have a hold recommendation. Codere’s stock has fallen about 70 percent in the past year, valuing the company at 71.6 million euros. The number of shares traded was about eight times the three-month daily average, according to data compiled by Bloomberg.

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