Restructuring Plans for French Grocer Casino Guichard Signal More Pain for Shareholders and Creditors

Scott Peters
05 Jul, 2023
New York City

Casino Guichard Perrachon SA traded sharply lower after two offers to inject capital in the troubled French retailer demanded  sharp dilution for current shareholders and sacrifice from secured creditors. 

Casino Guichard plunged 29.2% to €3.22 after the company disclosed two competing offers from two billionaires for equity recapitalization.  

French telecommunication entrepreneur Xavier Niel led group, 3F, offered Є450 million in equity into the business but also demanded commitment of Є450 million from secured creditors. 

The second offer led by Czech financier Daniel Kretinsky offered to inject Є1.35 billion in equity in the business. 

Kretinsky controlled EPCG and Marc Ladreit de Lacharriere controlled Fimalac will provide the proposed equity and both are current shareholders in the company. 

EPCG/Fimalac offered to inject Є860 million and anticipated Є290 million from secured creditors in equity investments and additional Є200 million through a rights offering. 

Both proposals see value in the current real estates and proposed to extend Є553 million debt maturity by four more years. 

The company said it plans to meet with representatives of creditors and the French Finance Ministry and court appointed observers. 

The French retailer is also pursuing its own plan to sell non-core assets including businesses in Latin America but keep its money losing hypermarket business which is facing tough competition from a much larger competitor Carrefour SA. 

On June 28, the company said for it to operate it needs 900 million in new equity capital and covert all of unsecured debt of Є3.5 billion into equity and convert at least between Є1.0 billion and Є1.5 billion of Є4.0 billion secured debt to equity as well. 

Under both offers, existing shareholders will be sharply diluted and current shareholders' stake in the EPCG/Fimalac proposal will be reduced to 0.2% and in the 3F & Partners offer down to 0.03%.  

Both plans may fall short of the company's need in reducing debt to meet its cash flow target set in its 2025 business plan that also anticipates the grocer reducing its net debt to EBITDA to 1.0. 

According to restructuring plans the equity stake of 3F and partners will hold an equity stake of 57.19% and 50.10% in the plan proposed by EPGC and Fimalac. 

Casino Guichard has been operating under a heavy debt load and the company's woes only worsened during the pandemic years. 

The company  recently sold its remaining 11.6% stake in Brazil-based retailer Assia for Є326 million, after accounting for taxes and transaction costs. 

The retailer is also looking to sale or spinoff Group Exito, consisting its stores in Colombia, Uruguay and Argentina and the company said in a presentation to investors in November 2022 that it is on target to dispose of assets worth Є4.5 billion before the end of 2023.