LDN - Business

Debt concerns linger after Casino unveils refinancing plan

[October 23, 2019] By Dominique Vidalon

PARIS (Reuters) - French retailer Casino <CASP.PA>'s latest steps to shrink its debt pile will buy time for its main shareholder but not resolve all the problems faced by the group, ratings agencies and analysts said on Wednesday.

Casino, majority owned by Chairman and CEO Jean-Charles Naouri and whose parent group Rallye is also in the spotlight over its debt pile, said late on Tuesday it aimed to raise 1.5 billion euros ($1.67 billion) in new bank loans to help repay some of its debts.

It is also in talks to extend credit lines for four years.

The company's shares were roughly flat in late morning trading, after opening down 3%.

Barclays analysts said visibility on the refinancing of Casino's debts coming due had improved, but they voiced concern that the plan could increase average borrowing costs.

"The announcement also implies that Casino will continue to dispose of its assets in the coming years, and we question whether this would represent the strongest equity story from a long-term perspective," they added.

Casino is engaged in a 4.5 billion-euro disposal plan to shrink its debts, and is in talks to sell its Leader Price discount chain.

The company had net debt of 2.7 billion euros and its parent Rallye <GENC.PA> 2.9 billion euros at end-2018.

Along with domestic peers such as Carrefour <CARR.PA> and Auchan, it faces intense price competition in its home market as well as challenges from online players such as Amazon <AMZN.O>.

[to top of second column]

A customer shops in a Casino supermarket in Nice, France, January 15, 2019. REUTERS/Eric Gaillard/File Photo

In May, Naouri placed Casino's parent companies, including, Rallye, under protection from creditors. Talks with bankers started in September over a draft plan that would repay debt over 10 years..

Standard & Poor's on Wednesday removed its ratings on Casino debt from CreditWatch Negative - which is a precursor to a ratings change - saying the refinancing plan followed other measures by Casino, such as holding off on dividends for the next 18 months.

"The proposed refinancing transaction, if successfully executed, will allow the group to improve debt maturity schedule and liquidity position, thereby giving the company more time and headroom to improve cash profitability, cash generation and reduce debt," S&P said.

S&P kept its broader "negative" outlook on Casino debt, however, saying the outcome of the safeguard procedure on Rallye "can still indirectly damage Casino credit standing".

Moody's downgraded its long-term corporate family rating (CFR) on Casino to B2 from B1. It also put it on review for a further downgrade in relation with the refinancing risk.

"This reflects Moody's view that Casino's liquidity could deteriorate in the near-term if the planned refinancing does not proceed as expected," Moody's said. ($1 = 0.8997 euros)

(Reporting by Sudip Kar-Gupta and Dominique Vidalon, editing by Deepa Babington)

Back to top