Casino Guichard-Perrachon SA said it will need an equity boost of €900 million ($981 million) or more and the conversion of its unsecured debt into stock as the French retailer hammers out a restructuring plan.
The grocer and its creditors are aiming for a deal by the end of July, though the so-called conciliation talks they entered last month could drag on until late October, Casino said on Monday.
The debt-laden retailer and its chief executive officer, Jean-Charles Naouri, struggled for years to shore up its balance sheet, until agreeing to enter the court-supervised talks with creditors. The retailer has already received approaches from two groups of investors, each proposing equity injections of €1.1 billion.
Casino shares fell as much as 7.6% in Paris trading on Monday, while the retailer’s unsecured bonds fell across the board by more than three cents on the euro to around 12 cents.
One offer is led by Czech billionaire Daniel Kretinsky, who holds a stake of about 10% in the French company. Kretinsky said he’s willing to invest €750 million himself provided Casino slashes €3.6 billion of unsecured borrowings through bond buybacks and a conversion of debt into equity. He’d be joined by Fimalac, which would invest €150 million.
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Under another approach, led by telecoms mogul Xavier Niel, the billionaire and two business partners would invest as much as €300 million in a broader €1.1 billion rescue plan. Details on how the trio would raise the rest of the funds have yet to emerge.
Casino has about €7 billion of debt and is looking to convert at least €3.5 billion into equity and extend the maturity of the rest to allow “sufficient headroom to execute its plan” with adequate liquidity, according to a presentation on Monday. The company is still discussing with creditors the terms of the conversion.
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Chief Financial Officer David Lubek told reporters on a call that the retailer had enough funds to allow it to operate until the end of the year, provided some conditions are met, including the closing of a sale of some stores to Groupement Les Mousquetaires. Casino aims to boost its convenience store formats, notably its Monoprix and Franprix banners, as part of its business plan, he said.
The company will also continue with disposals, including of its remaining assets in Latin America, real estate holdings and a residual stake in renewable energy firm GreenYellow, between this year and next. Last week, it sold its remaining stake in Brazilian supermarket chain Assai for about €326 million.
What Bloomberg Intelligence Says
Groupe Casino’s restructuring plan assumes, somewhat fancifully, that growth in France can be restarted around convenience and premium urban grocery after €900 million of new equity is raised, all unsecured debt is converted into equity and the remaining Latam and peripheral assets are sold. The inability to generate operating free cash flow isn’t being solved so creditors and new investors may demand more control and a plan that addresses long-standing weaknesses.
— Charles Allen, BI retail industry analyst
Casino Plan Doesn’t Solve Operating Cash-Flow Shortfall: React
To preserve liquidity, the group reached an agreement in principle with the French government last week to defer payment of about €300 million in tax and social security liabilities due between May and September. That amount will have priority over other existing obligations and will be paid on the completion date of the financial restructuring, the company said.
The conciliators also asked all financial creditors to agree to a standstill for any payments of interest and other fees and installments of principal owed during the debt talks — excluding swaps, bank overdrafts and other operating financing.
They also asked relevant creditors to waive any potential default or cross-default event as a result of that suspension, as well as any breach of financial covenants under the revolving credit facility as of June 30 and Sept. 30.
--With assistance from Giulia Morpurgo.
(Updates with details on asset disposals, discussions with government and creditors to preserve liquidity)
Author: Angelina Rascouet and Irene García Pérez