Casino's parent Rallye shares slump after court backs SocGen

Finatis SA

09/07/2019 13:36

* French court backs Socgen in Rallye shares collateral
dispute 
    * Casino's parent companies are under protection from
creditors
    * Ruling seen as a setback for group controlling holder
Naouri

    By Dominique Vidalon
    PARIS, July 9 (Reuters) - Shares in debt-burdened Rallye
 GENC.PA  slumped on Tuesday after a French court ruled that
Societe Generale can call in collateral it owns in Casino's
 CASP.PA  parent, in what is seen as a blow to controlling
shareholder Jean-Charles Naouri.
    Casino Chairman and Chief Executive Naouri in May placed the
retailer's parent companies Rallye, Finatis and Fonciere Euris
under protection from creditors in a bid to save the group from
collapse.  urn:newsml:reuters.com:*:nL5N22Z67W
    Under that safeguard procedure the servicing of bank and
bond debt was suspended for at least six months while the group
worked to reorganise its debt and potentially reschedule it by
up to 10 years.
    On Monday, Fonciere Euris  LOEX.PA , which owns 59.5 % of
Rallye, which in turn owns 51.7% of Casino, said in a statement
that a Paris commercial court had lifted a ban preventing
Societe Generale  SOGN.PA  from calling in collateral it had on
1,770,000 shares in Rallye, or 3.4 percent of its capital.
    Fonciere Euris had pledged the Rallye shares under a
derivatives contract it entered with Societe Generale in 2014.
    After the safeguard procedure was announced, Fonciere Euris
tried to prevent Societe Generale from calling in the collateral
and this was provisionally granted. 
    However, the latest court ruling dated July 4 cancels that
ban.
    If Societe Generale decides to use its collateral, this
would thus lower Fonciere Euris' stake in Rallye.
    Socgen declined to comment on the court decision and
Fonciere Euris was not available for further comment.
    By 1203 GMT, Rallye shares were down 6%, Fonciere Euris
shares were off 5% while Casino shares were roughly stable.
    "It seems some banks are no longer prepared to give time to
Jean-Charles Naouri. This shows the growing defiance of some
banks towards the dossier," said one analyst, who asked to
remain anonymous.
    "That said, it's a forward contract whose terms and legal
framework are very specific. I do not think one can extrapolate
this court decision to other traditional bank financings or to
the safeguard procedure," he added.
    French retailer Casino has been struggling to improve its
profitability in a tough business climate, raising concerns of
its ability to pay off the debt of Rallye through dividends.
    While Casino itself was not placed under bankruptcy
protection, it was hit with downgrades that left its credit
rating deeper in junk territory, with Moody's and S&P both
citing the company's strong connections with its overly indebted
parents.
    Casino has already cancelled its interim dividend and has
pledged to accelerate asset sales in a bid to reduce debt.
    Casino's net debt stood at 2.708 billion euros and that of
Rallye at 2.899 billion euros at the end of 2018.

 (Reporting by Dominique Vidalon, additional reporting by
Pascale Denis; editing by David Evans)
 ((dominique.vidalon@thomsonreuters.com; +33149495432; Reuters
Messaging: dominique.vidalon.reuters.com@reuters.net))