Debt-laden French retailer Casino plans 1.5 billion euros of asset sales

French supermarket company Casino aims to complete 1.5 billion euros ($1.77 billion) of asset sales by early 2019 to reduce its heavy debt burden.

Casino’s shares have fallen to a more than 21-year low while yields on its bonds and the cost of insurance against default have surged over concerns about the company’s leverage. 

In a statement on Monday Casino said that half of the asset sales would be completed in 2018 and the remainder by early next year. The disposal of non-core assets would mainly involve real estate, it added.

Asked during an investor call if Casino would commit to maintaining debt reduction next year, Chief Financial Officer Antoine Giscard d’Estaing said: “We have not given, at this stage, a final guidance, but we will continue to generate free cashflow and probably get the benefits of additional disposals in 2019 as well.”

The group said its debt-reduction drive will bring down its net debt in France by about 1 billion euros before the end of this year.

Private sector debt in France has hit a record 130 percent of gross domestic debt after big companies looked to lock in low interest rates, forcing policymakers to take action on Monday.

JUNK RATING

Casino’s credit rating was cut to junk status by Standard & Poor’s in March 2016.
The company said its liquidity position in France is now “at a very comfortable level” and that the group has benefited from 3.3 billion euros of confirmed credit lines that remain undrawn.

Investors and analysts, however, have yet to be convinced.

Barclays analysts estimated last week that Casino was burning through cash and raised questions about the capacity of its parent company Rallye to refinance debt maturing this year.

Asked if all proceeds from the asset sale would be channeled into reducing group debt, Giscard d’Estaing said: “We are very clear the target is obviously to reduce the debt as early as the end of 2018.

“Of course if we do better ... everything above the plan can be used in value created options for our shareholders.”

The CFO dodged repeated questions about whether property company Mercialys would feature in the asset sale. Casino reduced its stake in Mercialys from 50.1 in May 2012, again to help rein in debt.

He said that growth in French earnings before interest and tax (EBIT) would be about 10 percent from 2018.