The value of French grocer casino debt has fallen to deep distress levels due to concerns that continued weaker incomes could hit the loan contract for the invention year.
Casinos have lost market share in France's crowded food retail industry and have suffered renewed pressure from debt markets in recent weeks, with traders now offering 1.4 billion euros on loans on 61 cents.
The huge discount on face value shows that lenders are helpful to the prospect of huge losses, and lenders have been hardly a year after the casino ended a bruised restructuring in which more than €5 billion in debt was wiped out and exchanged for equity.
Jean-Charles Naouri, former owner of the casino, built the retailer into a global player with a series of highly leveraged acquisitions. It has a large number of supermarkets and large supermarkets in France, plus an international business from Asia to Latin America.
But after years of heavy debt struggles that have put the casinos in investment, retailers are forced to surrender and agree to a full debt restructuring in 2023, Czech billionaire Daniel Kretnisky was under control.
French Supermarket Group reported sales last year with a market value of less than 250 million euros. By the end of 2024, its total debt was 20 billion euros.
Clément Genelot, an equity analyst at Paris-based investment bank Bryan Garnier, wrote in a recent note that the cash-burning retailer "still has no signs of commercial recycling" and cannot rule out the K example of owning a 53% stake, he needs more capital.
A man close to Camp K said he "always thought of" that he might need a second capital. The person added that while this may trigger negotiations with creditors, it will not lead to a mature debt restructuring.
Several restructuring advisers told the Financial Times that they are actively seeking authorization from different categories of creditors in the casino for any potential discussion.
The casino declined to comment.
Troubled debt investors say the casino’s weak revenue has raised concerns about imminent covenant violations. The retailer's auditor noted in March that the violation could cause lenders to demand “immediate repayment” of their loans, some of which have cross-default clauses that could affect other debts at the casino.
As part of last year's restructuring of the casino, the casino agreed to a loan of 1.4 billion euros and received a credit line of 711 million euros from the bank, which must be followed from September. Failure to do so may inspire further renegotiation of its debt.
One of the clauses shows that the ratio of net debt to income in its core business must be less than 8.34 times. The casino reported that the leverage ratio was 14.6 times at the end of March due to lower profits, up from 4.9 times a year ago.
Genelot said casinos should still be able to comply with their debt terms by the end of this year, but next year's "high risk" of breaching the covenant.
Rating agency Fitch has ranked CASINO's secured loans in CCC- and placed them in a bracket indicating "substantial credit risk" that "default is a real possibility."
A decade ago, the casino had a strong investment-grade credit rating, while its owner, Naouri, was a firm credit line for the French elite, gaining a wide range of positions for his business acumen.
The portfolio he built has been demolished as the group sold stores and subsidiaries to reduce overhead costs and repay its debts - although it retained its valuable domestic urban network and traded under brands including Single Prix and Franprix.
Other reports by Euan Healy and Ian Johnston