Casino shares tumble on debt-to-equity conversion plan

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Shares in French food retailer Casino tumbled as much as 37 per cent on Thursday after the heavily indebted group said it would convert up to €1.5bn of secured debt into equity, warning that its shareholders would be “massively” diluted by the move.

Between €1bn and €1.5bn of Casino’s assets in secured debt would be converted into equity in order to reach a debt structure “compatible” with cash flow generation laid out in its 2023-25 business plan, the company said in a statement on Wednesday. The group had already announced that €3.6bn of unsecured debt would be converted into equity.

“The current shareholders of Casino will be massively diluted and [parent company] Rallye will no longer control Casino,” the company said. Supermarket group Rallye’s shares fell 45 per cent on Thursday.

Casino began voluntary negotiations with its creditors — called a procedure to conciliation — in late May.

However, its financial situation is deteriorating rapidly, and the official in charge of the restructuring process had submitted a request for all debt payments, both principal and interest, to be suspended until the end of the negotiation period.

In a further twist, stakeholders in the proceedings were on Wednesday asked by Casino to submit new equity offers by July 3 “at the latest” in order to reach an agreement on the terms of the restructuring by the end of the month. The agreement will have to include an equity contribution of at least €900mn, Casino said.

The announcement took some by surprise. There had been “no indication” going into Wednesday’s meeting that Casino was about to announce an equitisation of its secured debt, said one of the group’s unsecured bondholders. “There were some not so flattering words said to the other side.”

Casino is also treating its secured bonds and loans differently, with lenders in line for the equity swap whereas bondholders will get repaid from the proceeds of asset sales over time.

Casino did not immediately reply to a request for comment.

Casino’s shares, which later recovered slightly to trade 34 per cent lower, have almost halved since the start of the year, Refinitiv data shows. The company, which is France’s sixth biggest food group by market share, has for months been in talks with creditors to restructure its multibillion-euro debt pile.

Rating agency Moody’s downgraded Casino in late May, saying that a default over the next 12 months remained likely given the retailer’s weak liquidity position and “unsustainable” capital structure.

Later the same week Casino’s chief executive Jean-Charles Naouri was questioned by French financial investigators as part of a probe opened in 2020 into alleged stock manipulation and insider trading carried out by a group of people at the grocery company between 2018 and 2019.