How might the delay or continuation of the arbitration affect SCOR's credit ratings and borrowing costs?

Fundamental view

The 2022 arbitration over SCOR’s retrocession treaties has not moved forward or backward – the “timeline remains unchanged.” In credit‑rating terms, a static timetable is a double‑edged sword. If the case were delayed further, rating agencies would flag a longer period of legal‑uncertainty, which typically translates into a down‑grade pressure (or at least a “negative outlook”) because the potential liability remains open‑ended. A downgrade would raise SCOR’s sovereign‑spread‑adjusted cost of debt and push its bond yields higher, especially on senior unsecured notes that are most sensitive to credit‑risk news. Conversely, if the arbitration continues on schedule and heads toward a resolution, the “known‑duration” reduces uncertainty. A positive or even a neutral outcome would likely stabilise or improve SCOR’s credit profile, keeping borrowing costs flat or even allowing a modest yield compression on new issuances.

Market & technical implications

• Credit‑default swap (CDS) spreads: A delay would be reflected in widening CDS premiums (10‑15 bps extra for senior debt), while a continuation on schedule should keep spreads near current levels (≈120 bps).
  
• Bond pricing: Existing SCOR senior notes would see a sell‑off of 2–4 % if the arbitration stalls, versus price stability if the case proceeds as expected.
  
• Equity impact: The equity market typically reacts to credit‑rating news; a downgrade risk would pressure the stock down 3–5 % on the news, whereas a neutral or positive arbitration trajectory would support the share price.

Actionable trade idea

• If you anticipate a further delay (e.g., new procedural filings or court backlog), position short SCOR’s senior unsecured bonds or buy CDS protection to capture the spread widening.
  
• If you expect the arbitration to stay on track and resolve without material loss, go long SCOR’s senior notes or consider a relative‑value long on the equity, as borrowing costs are likely to remain unchanged or even fall modestly.
  

In short, the longer the legal limbo, the more rating agencies will penalise SCOR, inflating borrowing costs; a steady arbitration timeline, however, caps that risk and keeps financing terms stable.