Casino Guichard-Perrachon SA

Group of Casino TLB Holders Mandate Latham & Watkins Amid Teract Merger Talks

Thu 04/27/2023 05:26 AM
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A group of Casino’s €1.425 billion term loan B holders have mandated law firm Latham & Watkins as the retailer considers options to merge its French retail arm with Teract, sources told Reorg.

While details on the merger remain limited, the transaction contemplates that two separate entities will be created. One will house all the retail activities of Casino and Teract in France (newco) and is expected to be listed and controlled by Casino. The other, named Teract Ferme France, would be in charge of supplying local agricultural products and controlled by InVivo.

Sources monitoring the ongoing discussions told Reorg they believe Casino’s mostly undrawn €2 billion secured RCF and the €1.425 billion term loan B could be transferred to the new joint venture, though an agreement with these two facilities is yet to be reached.

Casino and Teract recently announced exclusive discussions with the retailer Les Mousquetaires to include Teract in their existing strategic cooperation agreement and further expand it. Les Mousquetaires could also become a minority shareholder in the new entity and is considering - alongside Teract’s largest shareholder InVivo - an investment of €300 million in the new entity.

The new entity could transfer to Les Mousquetaires a number of points of sale from the Casino France perimeter representing a minimum of €1.1 billion of turnover including value added tax, or VAT, over several years and at market value. Casino and Teract’s shareholders have started discussions with other potential investors to complete its fundraising and are aiming to raise €500 million of additional equity to provide the new entity with financial resources to implement its strategic plan.

In addition, earlier this week, Casino received a conditional letter of intent from EP Global Commerce, a Czech company affiliated with 10.06% Casino shareholder VESA Equity Investment, to subscribe to a reserved capital increase of up to €750 million in Casino's share capital. Casino said this could lead to a change of control of the group and a significant dilution for existing shareholders, depending on the financial parameters ultimately agreed between the parties.

Following this, Casino launched a consent solicitation for its 6.625% senior notes due 2026 and 5.25% senior notes due 2027 to waive any event of default arising out of the opening of, or request for, a conciliation procedure, with a view to obtaining the consent of the required majority of holders of each of Casino's relevant bonds.

As reported, a group of Casino’s 2026 and 2027 bondholders mandated Willkie Farr as a legal advisor and Perella Weinberg as its financial advisor with the aim of engaging with the retailer over the planned merger with Teract.

Casino’s pro forma capital structure as of March 31 is below:
 
Casino Guichard-Perrachon SA - Pro Forma as of 03/31/2023
 
12/31/2022
  
EBITDA Multiple
(EUR in Millions)
Amount
Maturity
Rate
Book
 
Gross debt, as reported
3,934.0
 
 
  
Lease Liabilities Latam 1
2,411.0
 
 
  
Total Debt Latam Retail
6,345.0
  
2.5x
SSNs due Jan. 2024 (issuer: Quatrim) 2
553.0
Jan-15-2024
5.875%
  
€2.051B RCF due May 2025 3
50.0
May-2025
 
  
€1.425B Term Loan B due Aug. 2025 4
1,425.0
Aug-2025
EURIBOR + 4.000%
  
Total Secured Debt - France Retail/E-Commerce
2,028.0
  
3.3x
EMTN Bonds due 2023 (€1B initially issued) 5
-
Jan-2023
4.561%
  
Segisor Credit Facility 6
-
Jul-2023
 
  
Commercial Paper
59.0
 
 
  
€509M EMTN Notes due Mar. 2024 (€900M initially issued) 7
509.0
Mar-2024
4.498%
  
€357M EMTN Notes due Feb. 2025 (€650M initially issued) 8
357.0
Feb-2025
3.580%
  
€400M HY Notes due Jan. 2026 9
400.0
Jan-2026
6.625%
  
€460M EMTN Bonds due Aug. 2026 10
460.0
Aug-2026
4.048%
  
€525M HY Notes due 2027 11
525.0
Apr-2027
5.250%
  
Cdiscount: Gvt-backed loan (amortizing) 12
60.0
Aug-2026
 
  
Monoprix: Confirmed Credit Lines due 2024 and 2026 13
170.0
Jan-2024
 
  
Others: Bank overdrafts
239.0
 
 
  
Total Unsecured Debt - France Retail/E-Commerce
2,779.0
  
4.4x
Lease Liabilities - France/E-Commerce
2,678.0
 
 
  
Total Lease Liabilities
2,678.0
  
5.5x
€600M Perpetual hybrid bonds 14
600.0
 
EURIBOR + 1.000%
  
€750M Perpetual bonds 15
750.0
 
3.992%
  
Total Subordinated Debt
1,350.0
  
6.1x
Total Debt
15,180.0
  
6.1x
Less: Cash and Equivalents
(3,157.0)
  
Net Debt
12,023.0
  
4.8x
Plus: Market Capitalization
723.0
  
Enterprise Value
12,746.0
  
5.1x
Operating Metrics
LTM Revenue
33,610.0
  
LTM Reported EBITDA
2,508.0
  
LTM Reorg EBITDA
1,569.0
  
 
Liquidity
RCF Commitments
2,221.0
  
Less: Drawn
(170.0)
  
Plus: Cash and Equivalents
3,157.0
  
Total Liquidity
5,208.0
  
Credit Metrics
Gross Leverage
6.1x
  
Net Leverage
4.8x
  

Notes:
Capitalization table post IFRS 16 (Reorg EBITDA is pre-IFRS 16 EBITDA as reported, composed of €721M France Retail + Ecommerce (€690M as per RCF covenant definitions) and €848M for Latam. For France Retail + Ecommerce: Total gross debt, secured gross and cash at respectively €4,945M, €2,028M and €1,087M (PF for Assai stake sale/100M Quatrim bonds buyback). Restricted cash: cash in segregated accounts for debt repayments.. Market cap as of Apr. 3, 2023.
1. As per balance sheet.
2. €800M initially issued. €147M repurchased in 2022 and €100M repurchased in March 2023.
3. Composed of €252M trache maturing in Oct. 2023 and €1.799B tranche maturing in May 2025 (July 2026 if TLB is refinanced by then ). Quarterly covenant test adjustments (with focus on France Retail+E-commerce perimeter, excluding GreenYellow): ratio of secured gross debt to EBITDA, after lease payments, not in excess of 3.5x; ratio of EBITDA, after lease payments, to net finance costs not less than 2.5x
4. €1B contracted on Mar. 30, 2021. €425M add-on in Nov. 2021.
5. €184M repurchased in 2022, including €154M purchased in a tender offer in October. Remaining €36M bought back in Q1'23.
6. €400M loan initially contracted. Refinanced in July 2021. Repaid early in 2022 using proceeds from the partial disposal of Assaí.
7. €900M initially issued in 2014. €29M repurchased in 2022. €20M repurchased year-to-date.
8. €650M initially issued in 2014.
9. Issued Dec. 2020.
10. €900M initially issued in 2014.
11. Issued on Mar. 30, 2021.
12. €120M initially contracted. Repayment schedule: €60M due in August 2022, €30M in August 2023, €18M in August 2024 and €5M in August 2026
13. €40M due in Jan. 2024, €130M due in Jan. 2026
14. Issued in 2005. Redeemable at the company's discretion and interest is due only if the group pays a dividend on its ordinary shares in the preceding 12 months.
15. Issued in 2013. Rate resets every five years (pays 3.992% since Jan 31, 2019). Redeemable at the company's discretion with the first call date set for 31 January 2019 and the second on 31 January 2024.
Pro Forma: for bond buybacks since Dec. 31, 2022, including €100M buyback of Quatrim Notes at 94 completed on March 31. Cash balance pro-forma for $778M of proceeds from Assai 18.8% stake sale completed on March 17

-Andrew Ross, Robert Schach, Aurelia Seidlhofer
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