French grocer Casino Guichard Perrachon SA is beginning court-supervised talks with its creditors, a process that could clear the way for the debt-laden company to land an equity investment from Czech investor Daniel Kretinsky.
(Bloomberg) — French grocer Casino Guichard Perrachon SA is beginning court-supervised talks with its creditors, a process that could clear the way for the debt-laden company to land an equity investment from Czech investor Daniel Kretinsky.
The so-called conciliation process will last up to five months, the company said in a statement Friday. Casino shares, which had been suspended since before the market opened Tuesday, dropped 8.2% to €6.205 at 11:02 a.m. in Paris. Notes due in March 2024 are now indicated at 21 cents on the euro, after starting the week at 27, according to CBBT pricing compiled by Bloomberg.
Separately, Casino announced an agreement to sell some stores with about €1 billion ($1.1 billion) in annual sales to retailer Groupement Les Mousquetaires, which runs the Intermarche supermarket chain in France. Casino also has the option to sell another group of outlets, with about half that amount of combined sales, to Les Mousquetaires within three years, the company said.
Casino sought the talks to negotiate with creditors in private about a proposal from Kretinsky, who’s an existing shareholder in the company, to fix its balance sheet. That could potentially solve Casino’s debt problem, while taking control out of the hands of Chairman Jean-Charles Naouri, who has a majority stake via his Rallye SA holding company.
Casino will also discuss with creditors a plan to merge its assets in France with retailer Teract SA. The company said today’s agreement with Les Mousquetaires is in line with talks underway with Teract.
Last month, Kretinsky proposed that Casino raise €1.1 billion in equity, of which he would provide €750 million. One of the conditions of the offer is that the grocer needs to buy back unsecured debt and convert a substantial amount into equity. Casino’s consolidated net debt stood at €5.1 billion as of March 31, the latest report available. Casino said at the time that it would consider seeking a conciliation process to win creditor approval for the deal.
Read more: Casino Guichard Lenders Engage Advisers Ahead of Debt Talks
Creditors agreed to let Casino ask the Paris Commercial Court to open the conciliation proceedings without it being considered a default, Casino said. Conciliation is a voluntary proceeding in French law in which a company and its lenders renegotiate debt terms under the supervision of a court-appointed agent.
What Bloomberg Intelligence Says:
Groupe Casino’s acceptance of a future €100 million equity investment from Groupement Les Mousquetaires in return for selling some stores seems to signal that there will be heavily dilutive new equity investment, with Teract and, likely, EP Global Commerce (which has proposed a €1.1 billion equity raise) participating. This comes in parallel with the opening of conciliation with financial creditors, which implies that despite €4.2 billion in French asset disposals and the €723 million stake sales in Assai, the company’s debt burden is unsustainable.
Casino Lines Up New Equity as Debt Conciliation Starts: React
Casino has been struggling in particular with its operations in France, where it’s been burning cash. Last year the company had an average drawdown of €1.23 billion out of the €2.1 billion it had available, pointing to a liquidity stretch.
Read more: Paris Grocery Titan Naouri Turns to Protege to Save Empire
In the deal with Les Mousquetaires, Casino didn’t disclose how many stores would be sold and for how much. Les Mousquetaires will also take a minority €100 million equity investment in the future financing round of Casino, the grocer said. This won’t clash with Casino’s plan to negotiate a joint venture with Teract, the food-retail startup backed by billionaire Xavier Niel, according to Casino.
Casino’s shares have plunged more than 90% over the past decade, touching a record low in March, while its bonds are priced at distressed levels as investors bet a default is looming.
The conciliation procedure only applies to the financial debt of the group and some of its subsidiaries including Cdiscount and will have no impact on operational partners including suppliers or company employees, Casino said.
–With assistance from Giulia Morpurgo.
(Updates with stock move in second paragraph, more details in fifth.)
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