Casino clinches debt deal led by Czech billionaire Kretinsky

By Dominique Vidalon and Helen Reid

PARIS (Reuters) -Casino said on Friday it had agreed a long-awaited debt restructuring deal with creditors led by Czech billionaire Daniel Kretinsky to avert bankruptcy, but its shares fell 11% as it reiterated shareholders would be "massively diluted".

Under the agreement in principle, 1.2 billion euros of new money will be injected into Casino and its debt of 6.4 billion euros ($7 billion) will be restructured. A consortium led by Kretinsky will end up owning between 50.4% and 53% of Casino shares.

France's sixth-largest retailer was brought to the verge of default after years of debt-fuelled deals and recent losses in market share to rival supermarket groups.

Casino's board approved talks last week with a consortium led by Kretinsky's company EPGC, alongside Casino's biggest creditor Attestor, and second-biggest shareholder Fimalac. The consortium had formed to resolve differences among the creditors over a solution.

The deal brings an end to the 30-year reign of Casino CEO and controlling shareholder Jean-Charles Naouri, 74, who controls Casino via his listed holding company Rallye.

"Casino shareholders will be massively diluted and Rallye will lose control of Casino," the group said. Rallye shares were down 20%.

Of the 1.2 billion euros in new equity, 925 million euros of the shares will be reserved for the consortium and 275 million euros for creditors and existing shareholders, by order of seniority, according to Casino's presentation of the offer.

Bryan Garnier analyst Clement Genelot has argued that Casino needs between 2.5 billion and 3 billion euros of new money to recover, much more than the deal offers.

In a joint statement welcoming the deal, Kretinsky said the time had come to return Casino to "breakthroughs and growth".

Kretinsky, 47, a former investment bank lawyer who built one of Europe's largest energy groups, has been scooping up assets in retail, media and other sectors, buying stakes in French retailer Fnac-Darty, British supermarket chain Sainsbury's and German grocer Metro as well as France's Le Monde newspaper.

The consortium aims to finalise a binding lock-up agreement in September and complete all restructuring in the first quarter of 2024.

Casino also said it had obtained agreement from creditors under a revolving credit facility to waive their right to claim payment in the event of default. French banking groups have confirmed their agreement to the deal, Casino said.

The deal would convert 4.9 billion euros of debt into equity, which together with the 1.2 billion of new money would reduce the group's indebtedness by 6.1 billion euros, according to a presentation published on Casino's website.

NEW BUSINESS PLAN

Casino on Friday restated its guidance for 2023, slashing its France EBITDA margin target to 1.4% from 2.9% and sales to 14.9 billion euros from 15.3 billion euros.

At a time when France's traditional retail sector is adapting to the rise of e-commerce and hard-discount supermarket chains, Casino's new owners plan to increase marketing spend, improve service in stores, and boost online shopping offerings, their business plan published on Friday showed.

The group aims to "generate synergies across banners by capitalising on the group's strengths," such as the apparel offer at Monoprix stores, which are more upmarket and concentrated in big cities.

In a pledge aimed at allaying the French government's fears of job losses, the consortium said it plans to increase staffing at stores and warehouses and maintain staffing levels at Casino's head office which will stay in Saint-Etienne, a city near Lyon.

The Casino group employed 50,000 people in France at the end of last year. The leaders of Casino, Cdiscount, Franprix, and Monoprix will stay in their posts, the consortium said.

The shares were trading at 2.8 euros by 0905 GMT. The stock has dropped 72% since the start of the year.

($1 = 0.9110 euros)

(Reporting by Dominique Vidalon; editing by Lincoln Feast, Jason Neely and Sharon Singleton)