Casino Guichard Perrachon SA reached a restructuring deal with creditors that will see Chairman Jean-Charles Naouri’s holdings in the debt-laden French supermarket operator wiped out as he cedes control to investors led by Czech billionaire Daniel Kretinsky.
(Bloomberg) — Casino Guichard Perrachon SA reached a restructuring deal with creditors that will see Chairman Jean-Charles Naouri’s holdings in the debt-laden French supermarket operator wiped out as he cedes control to investors led by Czech billionaire Daniel Kretinsky.
The grocer’s board approved the agreement with Kretinsky, partner Fimalac and creditor Attestor Capital to recapitalize the business and cut debt, according to a statement Friday. Creditors holding more than two-thirds of the company’s term loan also have given their approval, it said.
The agreement calls for Casino to enter a court-supervised restructuring process by October and complete the revamp in the first quarter of 2024.
Shareholders will be all but wiped out and Rallye SA, Naouri’s publicly traded holding company, will lose control of Casino. Rallye said late Thursday it could be forced to liquidate if the rescue deal goes through. Casino and Rallye shares reached record lows on Friday, falling as much as 21.5% and 26.1% respectively.
Casino has been hamstrung for years by stagnant sales in the highly competitive French grocery market. The company on Thursday reported an underlying net loss of €1.3 billion ($1.5 billion) in the first half of the year.
Rallye and three other Naouri holding companies above it have depended on dividends from Casino, but the business hasn’t been able to pay out cash since 2019. The holding companies were placed under protection from creditors that year.
The deal — which has already received the the backing of secured creditors including Davidson Kempner Capital Management and Farallon Capital Management — would see Kretinsky, Fimalac and Attestor take a controlling stake in the firm.
Read more: Casino Set for Foreign Owner as Kretinsky Wins Support
Kretinsky will provide the majority of a €1.2 billion equity injection to bolster the company’s liquidity. More than €1.3 billion of secured debt and €3.5 billion of unsecured debt will be converted into equity.
“The offer is based on the intention to maintain Casino head office located in Saint-Etienne and to preserve its team in its current headcount, in order to support future growth prospects and challenges of the group,” the consortium said in a separate statement on Friday.
The intention is also to initiate a recruitment plan to increase headcount for stores and warehouses, and to “rejuvenate” CDiscount E-commerce platform, “currently suffering from under-investment for several years”.
What Bloomberg Intelligence Says:
Groupe Casino’s restructuring plan, with €1.2 billion in new funds and a €4.85 billion debt-to-equity conversion, may resolve the company’s excess-debt problem, but its approach to the operational shortcomings that led to the company’s crisis seems optimistic. A heavier 2023 loss is forecast, with an €882 million free-cash outflow after asset disposals, so the envisioned 1Q24 completion seems far in the future.
— Charles Allen, BI retail-industry analyst
Philippe Palazzi, former Lactalis and Metro executive, could be appointed as new chief investment officer by the new shareholders to lead the operational turnaround, according to the consortium’s statement.
“Casino is a remarkable group,” Kretinsky said in the statement. “Time has come to catch up with breakthroughs and growth.”
The company has been seeking since 2018 to cut debt via asset sales, but its concentration in areas heavily reliant on tourism backfired during the pandemic and a strategy to raise prices more than its competitors added to Casino’s woes more recently.
Since late May, the company has been negotiating a solution with creditors and two bidding groups in a court-supervised process known as conciliation in which the French government was also involved, given the grocer’s role in employment and food security in the country.
Here are the details of the offer backed by secured creditors:
–With assistance from Luca Casiraghi.
(Adds shares in four paragraph, statement from consortium and table in second screen.)
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