September 17, 2018 / 10:10 AM / 3 months ago

Casino's parent Rallye buys more time with new credit line

* Banks grant Rallye additional 500 mln euro credit line

* Credit line is until 2020, no collateral pledged

* Rallye shares up 7 pct, Casino up 3 pct, Rallye’s bonds jump

By Dominique Vidalon

PARIS, Sept 17 (Reuters) - Rallye, the debt-laden parent of French supermarket chain Casino, bought more time on Monday ahead of a key bond refinancing deadline as five banks granted it a new 500 million euro ($582 million) credit line.

Top banks BNP Paribas, Crédit Agricole CIB, Crédit Industriel et Commercial, HSBC and Natixis gave Rallye the additional credit until 2020 with no collateral, demonstrating “their willingness to support Rallye in the long term,” Rallye said in a statement.

Shares in Casino, whose stock price has been hard hit by concerns over its debts and that of Rallye, rose 3 percent to their highest since Aug. 7, while Rallye shares gained 7 percent to their highest since Aug. 29.

Rallye’s bonds jumped on news of the new credit line, while the cost of insuring the group’s debt against default fell to the lowest level since early August.

SHORT-TERM SOLUTION

“This resolves the liquidity issue and enables the company to gain time. With this line the issue of the 300 million euro March 2019 has been resolved. Rallye will still need to deleverage, but short-term pressure has disappeared,” Kepler-Cheuvreux analysts said in a note.

Rallye, through which CEO Jean-Charles Naouri controls Casino, needs to repay over 600 million euros worth of bonds in October and 300 million euros’ worth in March.

The more Casino’s shares fall, the less room Rallye has to manoeuvre since its credit lines also require it to pledge Casino shares as collateral for its debts.

Rallye said on Monday that the additional credit facility “does not benefit from any pledge on Casino shares, and comes on top of Rallye’s current liquidity”.

Rallye had undrawn credit lines of 1.7 billion euros as of June 2018.

“This new credit facility represents a short-term solution for Rallye, but it does not change our long-term view on the company’s balance sheet and financial equation,” Barclays analysts said in a note.

“Although Rallye will likely be able to repay its upcoming bond maturities thanks to its credit lines, Rallye’s sizeable 3 billion debt pile remains unchanged,” they added.

Casino, whose net debt stood at 5.4 billion euros at the end of June, has also pledged to sell 1.5 billion euros of assets by early 2019 to help cut debt.

“From Casino’s side, good operating performance and a better free cash flow will help, while the disposals will partly finance the dividend,” Kepler-Cheuvreux said.

$1 = 0.8585 euros Reporting by Dominique Vidalon, additional reporting by Leigh Thomas Editing by Susan Fenton

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