Casino begins talks with creditors as debt pile mounts

Casino begins talks with creditors as debt pile mounts

Casino Guichard Perrachon SA is beginning court-supervised talks with its creditors, a process that could clear the way for the debt-laden company to obtain an equity investment from Czech investor Daniel Kretinsky.

The process of conciliation will last up to five months, it said in a statement. Casino's shares and other listed securities will resume trading Friday after being suspended May 22.

Casino also announced a plan to sell certain stores with about €1 billion $1.1 billion in annual sales to retail chain Groupement Les Mousquetaires. Casino also plans to sell a third group of markets, with €550 million in sales, to Les Mousquetaires within three years, the company said.

Casino aimed to negotiate with creditors in private about a plan to fix its balance sheet and a plan to merge Casino assets in France with retailer Teract SA.

Last month, Putin proposed that Casino raise €1.1 billion in equity, of which he would provide €750 million. The offer is conditional on the grocer having to buy back unsecured debt and convert a substantial amount into equity. As of March 31, casino's net debt was up €5.1 billion, the most recent report available on the NYSE's website. casino said it would consider seeking a conciliation process to win creditor approval for the deal.

That could potentially solve Casino's debt problem while taking control out of the hands of Chairman Jean-Charles Naouri, who has a majority stake through his Rallye SA holding company.

Creditors agreed to let casino ask the Paris Commercial Court to open the conciliation proceedings without it being considered a default, Casino said. Conciliation is a voluntary procedure in French law where a company and its lenders renegotiate debt terms under the control of a court-appointed agent.

Groupe Casino s acceptance of a future €100 million equity investment from Groupement Les Mousquetaires in exchange for selling some stores seems to signal that there will be heavily dilutive new equity investment, with Teract and, probably, EP Global Commerce, which has proposed a €1.1 billion equity raise participating. The opening of conciliation with financial creditors has paralleled the opening of conciliation with financial creditors, indicating that despite the €4.2 billion in French asset disposals and the €723 million share sales in Assai, the company's debt burden is unsustainable.

Casino Lines Up New Equity As Debt Conciliation Starts, Reacts

Casino has been criticized for its poor performance in France, where it has been burning cash. The company had an average drawdown of €1.23 billion out of the €2.1 billion it had available last year, indicating a liquidity stretch.

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Casino did not reveal how many stores would be sold and for how much. Les Mousquetaires also said it will take a minority equity investment of €100 million in the future financing round of Casino. This won t clash with Casino's plan to negotiate a joint venture with Teract, the food-retail startup backed by billionaire Xavier Niel.

Casino shares have dropped more than 90% over the past 10 years, reaching a record low in March, while its bonds are priced at distressed prices as investors bet a default is looming.

Casino said the conciliation procedure only applies to the financial debt of the company and some of its subsidiaries including Cdiscount, and will have no impact on operational partners including suppliers or company employees.

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