French supermarket owner, Casino Guichard-Perrachon, has announced a strategic agreement with a consortium led by Czech billionaire Daniel Kretinsky, along with banks and other creditors. The objective of this agreement is to bolster the company’s capital base, paving the way for an equity injection and a significant reduction of its debt to the amount of 6.1 billion euros ($6.41 billion).
Lock-up Agreement Signals Progress
Casino Guichard-Perrachon revealed on Thursday that the lock-up agreement, a financial arrangement that imposes restrictions on insiders from selling their shares within a specified timeframe, signifies the next crucial step in the deal initially struck between the company and the Kretinsky-led consortium back in July.
Consortium’s Proposed Equity Injection
As part of the deal, the consortium has proposed injecting 1.20 billion euros in fresh equity into Casino Guichard-Perrachon, with 275 million euros reserved specifically for creditors and existing shareholders. Furthermore, the agreement also entails the conversion of debt into equity.
Addressing Ongoing Challenges
In recent months, Casino Guichard-Perrachon has been grappling with a persistent burden of high debt and a decline in its market share within its home country. Earlier this year, the company engaged in discussions with its creditors to ensure sufficient liquidity for the continuous operation of its business. As of June, Casino Guichard-Perrachon’s net debt stood at 6.1 billion euros, registering an increase from the 5.1 billion euros figure reported at the end of March.
Milestone Achievement for Casino in Financial Restructuring Process
Casino has reached a significant milestone in its financial restructuring process as its main creditors have given their agreement to a financial restructuring plan. This plan aims to create a favorable framework for the sustainability of the group’s activities, job continuity, head offices, and the continued development of all its brands.
According to Chief Executive Jean-Charles Naouri, the group will now engage in talks with creditors who have not yet joined the lock-up agreement to obtain their consent and move forward with the restructuring. Casino anticipates completing this process in the first quarter of the following year. However, it is important to note that approvals from the Commercial Court of Paris and France’s financial market regulator will be required.
As part of the plan, Casino expects that its current shareholders will undergo significant dilution, resulting in Rallye no longer controlling the company. Rallye currently holds a 51.7% stake in Casino.
At 0930 GMT, Casino shares were trading 0.5% higher at EUR1.20, while Rallye shares were down 0.2% at EUR0.10.
The Kretinsky-led consortium, set to gain control of the group after the restructuring, plans to appoint Philippe Palazzi as president and CEO of Casino. Palazzi was previously an executive at France’s Lactalis and Germany’s Metro.