Proposed Capital Increase

Under the capital increase plan, the majority of funds will come from Mr Křetínský’s investment vehicle EP Global Commerce (€750m). Fimalac is invited to provide €150m reserved equity with the remaining €200m by other existing shareholders in the form of preference shares subscription. Fimalac, a French financial group run by billionaire Marc Ladreit de Lacharriere, has been a minority shareholder in Casino with a Board seat representation since June 2020.

This new money would be a boon to the struggling French food retailer, whose volumes were hit by inflation due to its focus on premium priced products, and who is the worst performer in the fresh-food category amid rumours that some suppliers are concerned about its financial position. Casino France has limited cash to address these macro and competitive challenges as most of it sits outside the restricted group.

But it is bad news for Naouri who has come under pressure to cut the debt burden but is also keen to keep control of his empire. This restructuring proposal may result in Mr Křetínský stake building up from around 10% stake currently to up to 40% - this may lead to a change of control (CoC) for Casino and to a substantial dilution for the existing shareholders. Mr Naouri is unlikely to be thrilled by this prospect and is currently mulling the proposal.

Mr Naouri has an alternative path of his own making to consider that includes a two-way JV between Casino and TERACT. Following today’s announcement, this JV may potentially be strengthened and expanded to a three-way tie-up with Groupement Les Mousquetaires, the owners of Intermarche supermarket chain. To sweeten the deal, the JV could transfer to Groupement Les Mousquetaires a number of stores from the Casino France perimeter generating at least €1.1bn revenue. While this plan will result in some value leakages for Naouri, it will allow him to keep control of his French core assets.

The competing €1.1bn new money offer, however, is conditional on a substantial reduction of the group’s gross unsecured debt either via a Debt-to-Equity swap or a cash repurchase. The latter should not prove to be too expensive given that Casino’s SUNs are trading at very distressed mid-to-low 20s levels today.

Consent Requests

Alongside various regulatory approvals, Mr Křetínský is seeking the consent of various creditors to waive the CoC. Majority agreement is needed from the providers of Casino RCF, Monoprix RCF, the TLB and Cdiscount’s state-guaranteed loan, as well as from the bondholders of the Quatrim’s SSNs due 2023 and the 2026/2027 SUNs. 

To this end, Casino has launched a consent solicitation today (24 April 2023) with a preliminary deadline set for 19 May 2023 that is subject to extensions if needed. The process will be run via Kroll Information Agent platform (casino@is.kroll.com).

Mr Křetínský envisages this proposal to be implemented under the protection of a Conciliation process. Conciliation is a court-supervised process under the French pre-insolvency code that is consensual, amicable and flexible. It is overseen by a court-appointed conciliator (i.e. an impartial mediator) whose role is to help reach an agreement between the company and its stakeholders to resolve financial difficulties. The aim is to ensure that the group continues as a going concern.

The conciliation procedure is subject to a five month time limit, which cannot be exceeded.

Mr Křetínský specified that he is seeking to negotiate with secured creditors only, meaning that the court-supervised restructuring process may easily be used to cram down the unsecured creditors. Whilst providing comfort to participating creditors if they decide to inject fresh cash/equity A) they will benefit from super seniority (i.e. they will rank senior to all prior and most subsequent creditors) and B) their claims cannot be written off in a subsequent reorganisation / safeguard plan unless they agree to it.

Reminder: 9fin’s Denitsa Stoyanova, CFA, and Chris Haffenden will be bringing you exclusive insight into Groupe Casino in our upcoming webinar this Thursday 27 April at 1pm BST. (Even if you can’t attend on the day, please register to ensure you get the replay as soon as possible.)

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