Casino agrees debt restructuring deal with creditors

Casino on Friday announced a long-awaited debt restructuring deal with its main creditors to avoid bankruptcy, but its shares fell as much as 16% as the French retailer reiterated shareholders would be “massively diluted”.

The agreement in principle will strengthen Casino’s equity position and restructure its debt of 6.4 billion euros ($7 billion).

France’s sixth-largest retailer was brought to the verge of bankruptcy after years of debt-fuelled deals and recent losses in market share and revenue declines.

Last week, Casino’s board approved talks with Czech billionaire Daniel Kretinsky over a plan to inject 1.2 billion euros of new money into the retailer in return for stock.

According to Casino’s presentation of the offer, 925 million euros of shares will be reserved for the consortium led by Kretinsky and 275 million euros for creditors and existing shareholders by order of seniority.

In a joint statement welcoming the deal, Kretinsky said the time had come to return to “breakthroughs and growth”.

Bryan Garnier analyst Clement Genelot has argued that Casino needs between 2.5 billion and 3 billion euros of new money to recover, much more than the deal offers.

It calls for concluding a binding lock-up agreement in September 2023 and completing all restructuring in the first quarter of 2024, the statement said.

Casino also said it had obtained agreement from creditors under a revolving credit facility to waive their right to claim payment in the event of default.

Casino reiterated that its shareholders will be massively diluted and parent company Rallye will lose control of Casino under the deal.

The planned cash injection would lead to a 4.7 billion-euro reduction in overall debt, the company said.

Kretinsky’s rescue plan will end the 30-year reign of Casino CEO and controlling shareholder Jean-Charles Naouri at a time when France’s traditional retail sector is adapting to the rise of e-commerce and hard-discount supermarket chains.

The consortium Kretinsky’s company EPGC formed with the second-biggest shareholder, Marc Ladreit de Lacharriere’s Fimalac, and the group’s biggest creditor, Attestor, said in a statement on Friday that they were preparing Casino’s future.

They plan to increase staffing at stores and warehouses and reboot the e-commerce platform of discount banner Cdiscount, adding that they aim to maintain staffing levels at Casino’s head office, which will stay in Saint-Etienne, a city near Lyon.

Top management across Casino, Cdiscount Franprix and Monoprix would stay in post, the consortium said.

Casino on Thursday reported it plunged to a first-half operating loss of 233 million euros while cash flow in France deteriorated to negative 1.6 billion euros.

The shares were trading at 2.9 euros by 0810 GMT. The stock has dropped 72% since the start of the year.

($1 = 0.9110 euros)