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Casino bonds hit distressed levels amid increased refinancing risks

Logo of Casino in Nantes

LONDON (Reuters) - Some of French retailer Casino's bonds are trading at a distressed price, signalling higher refinancing risks over the next two years as interest rates rise and concerns grow about tightening credit conditions.

Debt trading at a heavily discounted price of 70 cents or less is considered distressed, meaning the borrower may default on it in the near term.

Casino has around 3 billion euros ($3.25 billion) of debt consisting of loans and bonds maturing between 2024 and 2025.

The 3.58% unsecured bond maturing in February 2025 was trading at 27 cents on the euro on Wednesday, according to Refinitiv data.


The bond was as high as 75 cents in February before dipping to the mid-40s area in early March and falling by some 10 cents on the euro since last Thursday.

The cost of Casino's five-year credit default swap (CDS) - a form of insurance for bondholders - was at 69 basis points (bps) upfront on Wednesday, up from 65 bps a week before, according to data from S&P Global Market Intelligence, another sign of higher default risk for the company.

Typically, once a credit becomes particularly distressed, an upfront payment is required to enter into a CDS contract, as in Casino's case.

Its CDS rose by more than 20 bps over the course of March, the data showed.

Analysts expected the company to refinance its looming debt by using cash on balance sheet and proceeds from asset disposals.

But the company ended 2022 with less cash than analysts expected based on previous years' figures, despite the last quarter being historically the most cash generative due to Christmas sales. That makes it more challenging for them to refinance the debt, analysts say.

On Thursday of last week, Moody's cut its long-term debt rating for Casino further into junk territory with a negative outlook, citing market share losses, weak liquidity and high debt.

"The company continues to burn cash with negative free cash flow in France of around 900 million euros in 2022," Moody's said.

Following the downgrade, the firm's shares slumped by over 16% on Friday, their worst day on record, hitting a record low of 5.6 euros. They were trading at 6.1 euros on Wednesday.

Last Friday Casino also announced a cash tender offer for a portion of its outstanding 5.875% senior secured notes maturing in January 2024, in a bid to allay investor concerns and proactively manage its debt maturities.

The firm is offering to buy back 100 million euros of the bond at a purchase price of 94, according to IFR.

Casino declined to comment.

The company is in exclusive talks to combine its French retail business with smaller food retailer Teract as it seeks to reassure investors over its ability to generate cash and reduce debt. Earlier this month it sold down its stake in Brazilian supermarket chain Assai. ($1 = 0.9217 euros)

Graphic: Casino shares slump -

(Reporting by Chiara Elisei in London and Silvia Aloisi in Paris; Editing by Matthew Lewis)