Creditors Keep Silent on Mystery Buyer of Ruyi’s SMCP Stake

(Bloomberg) -- After winning a court order to know the identity of the buyer of a large stake in French retailer SMCP SA, creditors chasing after the Chinese company that sold it said it wasn’t time for them to make that information public.

The situation emerged as part of a lawsuit focused on Shandong Ruyi Technology Group Co.’s sale of a 16% stake in the owner of the Sandro and Maje brands. In the case, Ruyi’s creditors filed a suit to force shareholder registrar BNP Paribas Securities Services to reveal the name of the buyer.

Now that they know who it is, the creditors told a Paris judge that they preferred not disclosing the name publicly. Under French rules, stock-market regulators must be warned by buyer and seller of shares in listed companies once ownership thresholds such as 5% and 10% have been reached. The information is then provided by regulators to the market.

“I will keep it quiet because we have the press here,” Lucille Madariaga, a lawyer for the creditors, said on Tuesday. “It’s not the moment to reveal it to the market.”

The Paris proceedings are the latest development in a battle between the Chinese company and creditors, which really ramped up after Ruyi defaulted on 250 million euros ($290 million) of notes that matured in September. Before then, it tried but failed to negotiate a restructuring deal with creditors, including Anchorage Capital Group and BlackRock Inc.

The exchangeable securities were issued by European TopSoho, a unit of Ruyi, to pay for its 53% stake in SMCP. A spokesperson for the retailer said in September that bondholders have security on 37% of the total share capital of SMCP, and could also claim an additional 16% stake if the value of the shares don’t pay back the principal of the bonds in full.

In October, the trustee of the bonds took possession of 29% of the pledge shares, becoming SMCP’s largest shareholder but just below the 30% threshold that would force it to launch a public offering for the rest of the company. It also appointed a receiver to sell the entirety of the 37% stake pledged.

A Ruyi spokesperson didn’t reply to a request for comment. A spokesperson for SMCP declined to comment.

Chasing the Shares

Troubles for the Chinese group started in 2019, after an aggressive $4 billion global spending spree and a shift in domestic politics that sought to curb overseas investments. Once dubbed China’s LVMH, the firm has been struggling under its debt pile. It’s clinging to its controlling stake in SMCP, its most valuable international investment, which it bought from KKR & Co. Inc. in 2016.

This year alone, Ruyi defaulted on Chinese local bonds totaling 3.4 billion yuan ($537 million). It’s been involved in multiple lawsuits, leading to restrictions on company executives. Another Ruyi unit, which owns menswear brands such as Paris-based Cerruti 1881 and Gieves & Hawkes, located in London’s famed Savile Row, fell into administration following a court-issued insolvency order against it. 

Following European TopSoho’s default, Glas -- acting as trustee of the bonds -- notified the Ruyi unit that it would take possession of the SMCP shares securing the bond, and that it would appoint a receiver to sell them so that creditors could cash in the proceeds. It also said it had served a bankruptcy petition on the unit in Luxembourg.

That prompted European TopSoho to start legal proceedings in September to block bondholders from enforcing their claim on shares of SMCP, claiming bondholders were trying to take control of its SMCP holdings at an unfair price. A few weeks later, it sold part of its stake to an unknown third party.

(A previous version of this story was corrected to say that BNP Paribas Securities Services is the shareholder registrar in the third paragraph.)

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