Casino guichard perpetual

Fitch Ratings-Milan/Stockholm-14 March 2024: The approval by the Paris Commercial Court of the accelerated safeguard plans of Casino Guichard Perrachon and its subsidiaries on 26 February 2024 constitutes a distressed debt exchange (DDE) in Fitch Ratings' view. The plans include restructuring the company’s financial liabilities by converting up to EUR4.9 billion of secured, unsecured and perpetual debt into equity and raising around EUR1.2 billion to fund the operations. However, Fitch will only take further rating action once the restructuring is complete, expected by 27 March 2024.

On 29 August 2023 Fitch downgraded Casino to 'RD' from 'CC' due to the uncured expiry of a 30-day grace period on the coupon of one of the company’s bonds and in conjunction with a French court temporarily halting payments under a number of financial obligations of the company.

Fitch believes that the accelerated safeguard plans approval imposes a material reduction on creditors' terms compared with the original contractual conditions and that in the absence of this exchange the company would incur a formal bankruptcy. These conclusions are derived from the change in the bond and senior debt terms, the debt-to-equity conversion proposed and the determination of the company to avoid formal insolvency.

The two conditions are key, under Fitch's criteria, to classifying debt restructurings as DDEs. In the event of a DDE, Fitch typically would downgrade the Issuer Default Rating (IDR) of the relevant issuer to restricted default or 'RD' on completion of the exchange. Casino’s IDR is already at ‘RD’ and now also reflects the consequences of a DDE.

The proposed restructuring of Casino's liabilities envisages several steps including a capital increase of up to around EUR1.2 billion, the conversion of EUR3.5 billion unsecured debt and EUR1.3 billion secured debt into equity. The plan also provides for the reinstatement of a EUR0.7 billion secured revolving credit facility and a EUR1.4 billion secured term loan B, and the ring-fencing of EUR490 million of secured bonds issued by the special purpose vehicle Quatrim SAS.

The plan has been agreed by qualified majorities of most tranches of bank debt and bondholders and the court has the authority to impose its validity on the remaining creditors.

We will re-rate Casino after completion of the restructuring to reflect the appropriate IDR for the issuer's new capital structure. The IDR at that point will also reflect the company’s updated business plan, our expectation of weaker business and credit profiles, the execution risks inherent in its relaunch strategy, and the lower debt burden. Fitch would also be likely to withdraw the existing instrument ratings, given the new capital structure.

Casino has divested several assets since the start of its discussions with creditors in early 2023, including its remaining stakes in Latin American retailers Exito and Assai. It has also agreed to sell most of its French Casino hypermarkets and supermarkets. Its operations have continued to suffer from heavy competition eroding its share of the French food retail market, from the focus of its management on debt-related issues rather than fully on the retail strategy, the loss of several managers during this period of uncertainty, and a heavy cash burn.

Upon re-rating the company we will take into account the effects of the planned cost savings, the competitiveness of a more streamlined organisation, and the stronger focus on premium and convenience in the French market.


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