France’s supermarket group Casino seems less focused on selling groceries than on selling bits of itself. Creditors and shareholders should keep their fingers crossed. Asset sales more than supermarket sales will provide the cash to pay down the group’s debts. There is no guarantee it will be enough.
Casino this week began selling at least 10.4 per cent of the share capital of Assaí, its profitable Brazilian subsidiary. It will generate about €490mn to help reduce leverage. This will come on top of a €4.5bn asset disposal plan, of which €4.1bn has been completed since 2018.
Despite such efforts, group net debt was €7.5bn at the end of the first half, up from €6.3bn a year earlier.
The Assaí sale will go some way to meeting bond debt of almost $1.2bn maturing in 2024. Another $1.8bn comes due in 2025. Casino must also deliver cash to its parent, Rallye, which faces a similar wall of repayments in 2025.
Casino is controlled by chief executive Jean-Charles Naouri through “Breton Pulleys”, a system of highly leveraged holding companies popular with French tycoons to maximise control at minimal cost. Heavy use of debt by Casino and its parents has caused alarm. S&P Global downgraded Casino’s credit rating in October.
Troublingly, Casino’s cash flow is negative at minus €230mn in the third quarter. The company is losing market share. Its French brands are at the pricey end of the market.
Casino’s shares rallied when the Assaí sale was announced in late October. But market worth, at about €1.2bn, is less than half what it was three years ago, before the pandemic. Its valuation, at 6.5 times forward earnings, has fallen from 23 times over the same period.
The sale of its shares in Assaí cuts Casino’s stake to just 30.5 per cent. That limits its share of Assaí’s earnings and its pool of disposable assets. This is Casino’s problem. Unless it sells more assets, groceries or both — tough in today’s market conditions — it will struggle to pay its debts.