(BFM Bourse) – Some bondholders have refused to accept the adjustments requested by the group. Consequently, the company will ask the president of the commercial court for grace periods which will prevent it from falling into default during the conciliation period.
The financial restructuring of Casino is not a long calm river. Heavily indebted, the distribution group is currently in the conciliation procedure to renegotiate its heavy debt, which represented more than 7.5 billion euros (gross amount) as of June 28. This procedure will last until the end of September or even the end of October.
To give itself oxygen and preserve its liquidity, the group has taken a set of decisions within the framework of this procedure, entering into an agreement with the State to defer payments of tax charges. Still with a view to preserving cash, the conciliators requested the suspension of interest payments and principal installments on the debt owed by Casino to its creditors. They also asked them to waive “declaring any anticipated payment on the basis of possible cases of default under financial covenants (commitments in terms of a group’s debt ratio to its creditors, editor’s note) on 30 June 2023 and September 30, 2023”.
Problem: the company announced on Monday that certain creditors, namely holders of “high yield” bonds (high yield bonds because they are poorly rated by rating agencies) of Casino have refused to grant the requested adjustments. The same applies to holders of bonds issued by Monoprix Exploitation.
Following these refusals, Casino indicated that it was going to request in the coming days from the commercial court, the application of “grace periods”, which concretely will allow it not to fall into default of payment during the reconciliation period.
Towards a covenant breach?
There is indeed reason to seek such a measure. The refusal of holders of “high yield” bonds has several consequences. Firstly, this means that Casino would end up paying interest of €12 million and €14 million, coming due on next July 15 and October 15, respectively.
In addition, this refusal means that these bonds (which represent a little over 900 million euros in principal, according to the company’s indications, on June 28) could be automatically due (therefore Casino should reimburse them immediately) “in case of non-payment of another significant financial debt (more than 40 million euros in principal) of the group”.
But this last risk exists. Casino explains that, at the end of June, it fully drew down its revolving credit facility (RCF), which should lead it, according to its forecasts, not to respect one of its “covenants” at the end of June. that is to say the commitments that the company makes to its creditors in terms of debt ratio. And so high yield bonds would theoretically become callable.
The grace period, if granted, will nevertheless prevent defaults from occurring during the duration of the conciliation, therefore.
A recapitalization of more than 1 billion euros?
“This request for pardon and the fact that they have fully drawn down their RCF line (a revolving line of credit, editor’s note) show how much the group consumes cash”, underlines Clément Genelot, analyst at Bryan Garnier & Co.
“This reinforces the idea that a capital injection of 1 billion euros may not be enough given the speed at which the group burns cash. Because in addition to restructuring, the company will have to invest in prices and renovate stores”, continues the analyst.
“We will have to see the decisions of capital contributors, if they decide to raise their offers or, initially, to identify assets to sell. There is a very good chance that Monoprix will be put up for sale in the next few months, especially as many parties could be interested”, he judges.
Two proposals have already come forward to bring funds to the distributor, the first coming from the Czech businessman Daniel Kretinsky, and the second from the trio Xavier Niel – Matthieu Pigasse – Moez-Alexandre Zouari. These two proposals propose injections of funds of up to 1.1 billion euros.
On the Paris Stock Exchange, the Casino share fell sharply in the first exchanges (the share lost for example 11% around 10:40 a.m.) before climbing back a little (-4.8% around 2:05 p.m.). In three sessions the title lost nearly 50%.
Casino had warned that it intended to convert into capital between 4.5 billion and 5.1 billion euros of debt. But the conversion of these amounts would probably have to be done at a significant discount which has not yet been determined. To the dilution due to this conversion will be added that linked to the capital injection. The group has set until Monday evening the deadline for capital contributors to submit their offers.
Julien Marion – ©2023 BFM Bourse
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