Casino Guichard Perrachon SA‘s stock fell to a record low after it warned its shareholders will be “massively diluted” as part of a broad restructuring plan that will also see Jean-Charles Naouri’s Rallye SA lose control of the firm.
The deal proposed by the retailer calls for unsecured and secured creditors to swap at least some of their holdings for equity, according to a statement sent late on Wednesday. The restructuring is necessary to reach a debt structure “compatible” with cash flow projections in a business plan for 2023 to 2025, the statement said.
Casino’s shares fell as much as 37.6%, while Rallye dropped 31% on Thursday in Paris.
The debt-laden retailer and its Chief Executive Officer Naouri struggled for years to shore up its balance sheet, until agreeing to enter court-supervised talks with creditors last month. The retailer has already received investment offers from two separate groups and seeks to reach an agreement by the end of July.
The company said it needs to convert all of its unsecured debt — €3.6 billion ($3.9 billion) of principal — and as much as €1.5 billion of secured debt into equity. Senior secured notes issued by Quatrim SAS would instead be “rescheduled and repaid” by divesting the real estate that backs the bonds, according to the statement.
Casino’s current debt structure includes:
Tax and social security liabilities and interest on secured debt deferred this year would be paid as the restructuring is completed.
The company reiterated that it needs an equity boost of at least €900 million. It’s seeking offers for the new money by July 3 in order to reach an agreement on the restructuring terms by July 27. It said it would discuss the debt-for-equity swap with creditors and new equity providers, and terms of the deal may change.
Read more: Casino Says It Needs Equity Boost of at Least €900 Million
“This is a bold and ambitious proposal,” wrote Tanvi Arora, an analyst at Lucror Analytics, in a note on Thursday. “Such a substantial equitization will be needed for the group to reach a manageable debt level and acquire the necessary liquidity to continue with its business plan.”
Casino’s unsecured bonds fell more than 2 cents on the euro on Thursday and are now indicated at about 6 cents, according to data compiled by Bloomberg. The Quatrim bonds also dropped 2 cents to around 70 cents.
One proposal for the recapitalization of the company is led by Czech billionaire Daniel Kretinsky, who already holds a stake of about 10%. Kretinsky said he’s willing to invest €750 million himself, provided Casino slashes its unsecured borrowings through bond buybacks and a conversion of debt into equity. He’d be joined by Fimalac, which would invest €150 million.
Read More: Kretinsky’s Casino Plan Spares €4 Billion Senior Creditors
Another approach by telecommunications mogul Xavier Niel calls for the billionaire and two business partners to invest as much as €300 million as part of a broader €1.1 billion rescue plan. Details on how the trio would raise the rest of the funds have yet to emerge.
--With assistance from Lucca de Paoli and Irene García Pérez.
(Adds more details on plan, debt structure and prices throughout.)