Casino and Parent Firms Suspended, Fueling Restructuring Talk

(Bloomberg) -- Casino Guichard-Perrachon SA’s parent companies may face a restructuring of more than $3 billion of debt as shares of the French supermarket group were suspended after a prolonged assault by short-sellers.

Shares of Casino, which operates 12,000 stores worldwide, dropped to an eight-month low Thursday and its bonds fell before being suspended in morning trading in Paris. Rallye SA, Finatis SA and Fonciere Euris SA, through which Casino Chairman Jean-Charles Naouri controls the retailer, also were halted. Rallye said it will make a statement later in the day.

“The suspension of the parent-company shares suggests that a form of debt restructuring will have to take place,” Bruno Monteyne, an analyst at Sanford C. Bernstein, said in a note.

Casino has been mired in controversy since 2015, when Carson Block’s Muddy Waters began shorting the company. He and other hedge-fund managers have said Casino and Rallye are too indebted and use opaque accounting to mask their true financial condition. Casino alone has 3.4 billion euros ($3.8 billion) of net debt, while its parent Rallye has 2.9 billion euros.

Standard & Poor’s and Moody’s Investors Service both downgraded their ratings on Casino’s debt last month.
Casino’s perpetual bonds dropped 3 cents on the euro to 48 cents Thursday, the lowest on record. Rallye bonds were suspended.

Naouri may have to step down from Casino if he loses control of the business, said Monteyne of Bernstein. Rallye, which has sold off all its investments besides Casino, is dependent on dividends from the retailer to meet debt payments.

Casino declined to comment, while a spokesman for Euris and Finatis wasn’t available.

Casino has redoubled efforts to reduce debt, extending an asset-sale process to raise as much as 3.5 billion euros. Analysts have said, however, that while selling real estate helps in the short term, beyond that the company will face higher rental costs and still needs to improve its cash flow.

Naouri, who is Casino’s majority shareholder, has said the accounting and financial disclosure are appropriate. Last year he hinted short sellers were ganging up on his companies, unfairly driving down their shares and bonds.

--With assistance from Luca Casiraghi.

To contact the reporters on this story: Albertina Torsoli in Geneva at atorsoli@bloomberg.net;Thomas Mulier in Geneva at tmulier@bloomberg.net

To contact the editor responsible for this story: Eric Pfanner at epfanner1@bloomberg.net

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